Claim that Sydney solicitor overcharged former HIH executive $700,000 … Byzantine submissions … HH says time to stop the skirmishing and get on with the trial … Kate Lilly reporting 

A couple will have their day in court, after claiming their solicitor over-charged them hundreds of thousands of dollars.   

George Sturesteps and his wife Beryl shelled out $2.7 million for Benjamin & Khoury’s legal services in a legal battle against the liquidators of HIH, which collapsed with debts of $5.3 billion in 2001. 

Sturesteps name may ring a bell. He was the 20th HIH executive to be banned as a director or manager by the insurance regulator, APRA. He is also on record with details of his high spending lifestyle at the insurance company’s expense, here and here.  

Last year the Sturesteps commenced proceedings against Dieb Khoury, saying his legal practice overcharged them $700,000.   

Khoury sought to have the case thrown out in the NSW Supremes.  

On August 3, Justice Michael Slattery in the equity division ordered the case proceed to trial.  

George Sturesteps had been a senior manager and director of HIH Casualty and General Ltd.  When the group went under, Sturesteps sought to sue the liquidator for entitlements he claimed as a result of the termination of his employment. 

On April 11, 2003 he engaged Dieb Khoury as his solicitor and on the same day Beryl Sturesteps retained Khoury to defend an action brought against her by the liquidators of another HIH company – HIH Overseas Holdings Ltd. 

Khoury asked them to make “satisfactory arrangements” to meet all outstanding and future legal costs under the retainer before the appeals were heard. The Sturesteps claim they signed a deed of agreement, as well as a collateral mortgage over a Melbourne property owned by Beryl. 

In late 2011, George Sturesteps terminated Khoury’s retainer and the cost agreement. By this stage, they had lost at the Court of Appeal and had forked out over $2.7 million in legal costs. The following year, the Sturesteps were denied special leave to appeal to the High Court. 

In 2014, the Sturesteps started proceedings against Dieb Khoury and Benjamin & Khoury Pty Ltd, claiming they had overpaid the practice by over $700,000 during the HIH saga. Among other things, the couple sought to recover the money (plus interest) on a restitutionary basis.  

The Sturesteps’ statement of claim was initially knocked back at the equity division’s expedition list.  Undeterred, the couple re-filed with more detailed pleadings. Khoury sought a summary dismissal in the Supreme Court, arguing the pleadings were “imprecise, immaterial or embarrassing and contradict[ed] the rules for pleadings in UCPR, Part 14″. 

Justice Michael Slattery had his own opinions about the pleadings, saying “the vast submissions of both parties in relation to the motions for and against the [further amended statement of claim] could be characterised as Byzantine”.   

Despite this, Slattery found the Sturesteps’ claims should go to trial.  HH tackled over a dozen points of contention in an exhaustive judgment – including claims for duress, undue influence, breach of fiduciary duty and misleading and deceptive conduct. Some of the other highlights included: 

Who paid whom? 

At the time the cost agreement was signed, Khoury was practicing as Benjamin & Khoury Solicitors. Three months later he incorporated and became Benjamin & Khoury Pty Ltd. 

At the Supreme Court, Khoury argued he never received any money from the plaintiffs, because the money was paid to his incorporated legal practice. Therefore, the claim against him for unjust enrichment could not stand.

The Stureteps claimed it was a case of constructive receipt. They also put forward a policy argument, namely, “a solicitor should not be able to prevent his or her client from claiming funds in restitution from that solicitor by the device of depositing the client’s cheques to the bank account of a company without assets”. 

Slattery let the claim stand. He held:

“The plaintiffs’ contentions are the more persuasive. Although the presently available evidence seems to show that Mr Sturesteps’ payments of his legal fees were banked by the company, his restitutionary claim against Mr Khoury is not so clearly untenable that it cannot possibly succeed … Without deciding the issue, the evidence does not discount the possibility that Mr Khoury did himself receive the amounts from Mr Sturesteps, in that Mr Khoury may have provided the legal services and thus may be taken to be the one who received the funds. Where Mr Khoury chose to bank the funds is not determinative of the identity of the recipient of the funds.” 

Deeming effect 

The wider basis for the restitution claim was an alleged mistake concerning Sturesteps’ right to have his legal fees assessed under the Legal Profession Act.  

The Sturesteps conceded that a statutory notice was displayed on each legal bill, informing them of their rights. Instead, they claimed the source of the confusion was the cost agreement, which read:

“The Act provides for the review and assessment of your legal costs for their fairness and reasonableness by a costs assessor appointed by the Supreme Court.

That right is not available to you in certain circumstances where there is a costs agreement which complies with the Act, unless the agreement is determined by a costs assessor to be unjust …”  

Sturesteps argued that, “he believed that the costs assessment notification in the statutory form displayed in the bills of costs were pro forma notifications which had no application to him because, as far as he was aware, he had a compliant costs agreement”. 

Khoury maintained that that inclusion of the statutory notices had the effect, at law, of curing any mistake as to Sturesteps’ rights.

Slattery found the restitution claim should go to trial: 

“Whether the inclusion of the r 45(d)(i) notice does, as a matter of law, mean that the recipient of the notice is deemed to have knowledge of the statutory scheme for costs assessment under Legal Profession Act, Division 6, is a question of law that remains to be determined, and upon which the rights of the parties depend. The court gave the parties almost two weeks after the hearing of these applications to find relevant authorities on this issue. Neither party could identify authority for the proposition that the statutory notice, once included in a bill of costs, had that deeming effect for which the defendants contend.” 

A disappearing deed  

Another intriguing aspect concerned the equitable deed of charge over Beryl Sturesteps’ property. In their statement of claim, the Sturesteps sought a declaration that the deed was voidable or unjust under the Contracts Review Act or Fair Trading Act. 

In fact, neither party could produce the deed in question. Khoury contended it doesn’t exist at all. As such, he argued that “any claims for relief should be struck out to the extent that they are made in relation to the non-existent deed”. However, Slattery found the non-existence of the deed was “not firmly established”.  

HH held:

“The possible existence of the deed of equitable charge may be inferred from the deed of agreement, which the defendants themselves authored and executed. As the defendants’ own deed of agreement refers to the deed of equitable charge, whilst the parties are at issue as to the possibility of the existence of the latter deed, it is premature to strike out the claims for relief in relation to that deed on the basis that it does not exist. This is a matter for trial.” 

Despite identifying some hiccups in the statement of claim, Slattery concluded it was well and truly time to go to trial. He said: 

“The plaintiffs have been able to resist most, but not all, of the defendants’ attempts to strike out the further amended statement of claim. It is highly desirable that the result of this motion should now provide a platform for the parties to bring on the final hearing of these proceedings. Far too much time has been spent in these proceedings on unproductive interlocutory pleading skirmishes in relation to a plaintiffs’ pleading that is on the whole now reasonably informative and workable. 

Such skirmishes must now come to an end and the parties should focus on the final resolution of the real questions in dispute between them in accordance with the dictates of Civil Procedure Act s.56. For that reason the court will make the orders below to give the parties an opportunity to examine a fresh pleading and have it filed or alternatively for them to submit in short compass any final but short argument about such differences as may remain between them in relation to this pleading.”