Because of mounting tax problems solicitor keen to secure business by giving a misleading costs estimate to a client … Unsuccessful in the Land and Environment Court … Nominal damages because the client benefited from the expense of the litigation in subsequently getting ministerial approval for a quarry … No reliance on doubtful estimates of costs … Hannah Ryan catches the action
In Burrell Solicitors Pty Ltd v Reavill Farm Pty Ltd Justice Richard White ordered Burrell Solicitors to pay $20 in nominal damages after it told its clients that proposed litigation would cost under $20,000.
The bill at the end of proceedings was closer to a more immodest $1 million.
The saga began six years ago, when the so-called Champion parties (cross-claimants Jeffery and Diana Champion and Champions Quarry Pty Ltd) retained Burrell Solicitors to act in two proceedings in the Land and Environment Court concerning the expansion of their quarry, a hot political topic in Lismore at the time.
Burrell Solicitors’ principal, John Burrell, wrote to the Champion parties with a “broad estimate” of up to $17,000 in costs for both proceedings.
The cases escalated in complexity and expense, and ultimately were unsuccessful for the Champion parties. Despite that they eventually received approval for the quarry expansion from the minister under Pt 3A of the Environmental Planning and Assessment Act 1979.
Along the way, the Champions paid Burrell’s costs and disbursements, including counsel’s fees, of just over $350,000. After costs assessor proceedings, judgment was entered in 2013 against the Champion parties for a further $537,000.
Burrell then approached the Supreme Court seeking to enforce the costs agreements. The Champion parties cross-claimed, arguing that Burrell was precluded from enforcing the judgments entered pursuant to the cost assessor’s determinations. They said that Burrell’s misrepresentations as to the likely costs induced them to retain him as a solicitor and continue to pursue proceedings.
What’s more, at the time he provided them, Burrell himself did not believe that there was a reasonable basis for the estimates. Troubled by a mounting tax debt, Burrell had underquoted to secure the Champion parties’ business.
His initial estimates had unrealistically assumed that at most only the equivalent of one day’s preparation would be required for a three-day hearing by a solicitor-advocate who would be responsible for all pre-trial preparation.
Both parties agreed that Burrell had failed to comply with his duty under the Legal Profession Act 2004 (NSW) to provide a written updated assessment of costs when it became clear that the scope and complexity of proceedings were expanding. Justice White did not accept that was an inadvertent failure.
The judge found that Burrell had breached the Legal Profession Act, misleading and deceptive conduct statutory provisions, as well as the contracts of retainer with the Champions. He also found that in acting in a misleading way to secure a client, Burrell breached the “fundamental duty of loyalty that a fiduciary owes to his principal”.
But that was the end of the good news for the Champions, who fell down on causation. Although the failure to provide reasonable estimates and to update estimates was misleading and deceptive conduct, Justice White found that it did not cause the damage claimed.
Crucially, he found that the Champions would have proceeded with the litigation even if reasonable costs estimates were provided. The facts established that the Champion parties had become aware soon after the initial estimates were provided that they were materially wrong, and that they did not rely on them in continuing to retain Burrell.
Further, although ultimately the Land and Environment Court proceedings were unsuccessful for the Champion parties, they were not without benefits for the claimants. A great deal of the costs were incurred in obtaining expert reports, which could also be used for their (successful) Pt 3A application.
Similar issues arose in both the Land and Environment Court proceedings and the Pt 3A application. Accordingly, the costs of the court proceedings were not shown to be wasted.
The costs assessment was reduced by five percent based on failure to disclose, and interest was not allowed. However, it did not appear to White that there was any particular deficiency in the manner in which the case was conducted, and he did not believe that the Champion parties were badly misled or that they received a standard of care that was inappropriate.
Justice White also rejected claims by the Champions that Burrell had agreed only to charge $10,000 per month, and that he had failed to take steps to settle the proceedings when instructed.
Ultimately, Burrell was liable only in breach of the contract of retainer, for the continued failure to provide a fresh reasonable estimate when it was its duty to do so – and then only for nominal damages of $20.
Forebodingly, costs of the Supreme Court proceedings are yet to be dealt with.