Another chapter in the colourful life and times of Sydney solicitor Leigh Johnson … NSWCA knocks out her fees of $2 million plus … Working for more than 24 hours a day … Australian Institute of Music … A “most unusual” bill of costs … Estoppel, with “extremely unusual” facts … Hannah Ryan reports
In a restrained, but sharply critical judgment, Justices Julie Ward, Fabian Gleeson and Mark Leeming found that Johnson was estopped from relying on the bill issued in 2015, overturning the first instance decision of Justice Paddy Bergin.
The decision is the latest episode in a series of events that has earned Ms Johnson the epithets “high-profile” and “colourful”.
Proceedings were commenced in 2007. The Calvos signed a standard costs agreement with Johnson and later executed a deed, known as the “2007 deed”, which required 32.5 percent of the shares in AIM to be transferred to Johnson, should the Calvos succeed in the proceedings.
The Calvos won the case in 2009 and received a beneficial costs order. Those shares were never transferred.
A further dispute arose in 2015 concerning whether the Calvos had to transfer a part of their AIM shareholding to a company, Ellimark Pty Ltd, which had partially funded their successful litigation. Seven weeks before that dispute went to trial, Mrs Calvo received a letter from Johnson’s lawyers, providing a bill of costs and disbursements in the amount of $2,289,248.54.
In response, in the week before the hearing, the Calvos filed a discrete cross-claim against Johnson in the Ellimark proceedings, seeking to have the 2007 Deed declared void on the basis that it contravened the Legal Profession Act 2004 (NSW), and a declaration that Johnson was estopped from claiming legal fees for work done in the earlier proceedings.
At first instance, Justice Bergin held that the 2007 Deed was void, writing that the unfairness of the situation was “of breathtaking proportion” and that Johnson had engaged in “inappropriate tactics”. However, she rejected the claim of estoppel, and certain aspects of the Calvos’ claim under the Legal Profession Act. The Calvos appealed from that decision.
This was no ordinary bill of costs. As put by HH Mark Leeming, there was much in it “which is of concern”.
Justice Ward described it as “very belated [and] … remarkable, both in terms of amount and in terms of the hours of work there recorded”.
The bill amounted to over $2 million, for work performed six years before it was served. On top of that, it included numerous items billed at Johnson’s rate, totalling over 24 hours on the same day, with nothing in the bill to suggest that “any lawyer other than Ms Johnson was charging $500 per hour on those days”.
Individual items also caused the court to scratch their heads, including “Searching LegalLink for confirmation of listing” for 90 minutes, totalling $750. Further sins included the lack of notification required by s.333(1) of the Legal Profession Act, the fact that it was styled as a tax invoice yet appeared to include no amounts of GST, and the absence of any reference to the $55,000 already paid by the Calvos.
The biggest problem was that, as Justice Leeming put it, “the amounts appear to be out of all proportion with amounts that could properly be charged”.
According to HH:
“It is difficult to conceive how Ms Johnson could ever have properly charged either $2.289 million (the amount on her tax invoice), or $2.476 million (the total of her itemised bill) or either of those amounts plus GST … It is difficult to conceive how Ms Johnson could ever have properly charged anything close to those amounts.”
Leeming said he would have referred Johnson to the Legal Services Commissioner if Justice Bergin had not got there first, based on the billing alone.
In a laudably quick judgment, the Court of Appeal upheld the appeal on the estoppel claim, finding that Johnson had represented that she would not seek to recover any additional legal costs over and above the $55,000 already paid to her by the Calvos.
Following their favourable costs order in 2010, the Calvos repeatedly wrote to Johnson requesting tax invoices for the amounts they had paid her and for any additional fees that were owed.
It seemed Johnson was playing hard to get. The requests went unrequited, and were eventually accompanied by threats to refer the solicitor to the Legal Services Commissioner – the Legal Profession Act required Johnson to provide an itemised bill within 21 days of being requested to do so.
The costs assessor issued a notice the following year, directing Johnson to produce copies of tax invoices. A failure to comply with such a notice is an offence. Johnson again responded with radio silence. The costs assessor then referred her to the Office of the Legal Services Commissioner.
The Calvos requested that the costs assessor complete her job on a final basis with Johnson’s costs to be withdrawn, on the understanding that they would file a new application later if those costs were not refunded in the meantime.
The costs assessor took the view that she was empowered to allow part of the costs to be withdrawn and assessed at a later time. The total amount of costs determined to be fair and reasonable was $115,265.73 and disbursements of $339,278.73, amounting to $471,820.52. The Calvos’ solicitors accepted a cheque in amount of $363,820.52 in full and final settlement of costs claim.
Meanwhile, in July 2011, Johnson responded to the Legal Services Commissioner with an extraordinary letter, promising to prepare an account for the costs assessor. In the letter, she said that she had acted for the Calvos from beginning to end, and that:
“They came to me and Mrs Calvo cried and begged me to act for them for NO money up front because she said they had none (this I came to realise was a lie as was most of what Mrs Calvo said, including her evidence).”
The letter complained of the Calvos’ “constant lies to myself and to counsel”, and the fact that she had worked solidly for three years on their apparently “unwinnable” case, and received only $55,000.
That slackness was ultimately costly for Johnson, as the Court of Appeal interpreted it as a representation that she would not seek to recover any additional costs. The time to service a bill of costs is when the client is seeking to enforce a favourable costs order against a solvent defendant, the court said, and a failure to do so invites an expectation that a lawyer will not seek to recover any additional costs.
The Calvos relied on that representation to their detriment, taking steps to finalise the assessment of costs.
Accordingly, the Court of Appeal granted permanent injunctive relief, preventing Johnson from taking any further steps to recover costs from her erstwhile clients.
Because of its decision on the estoppel point, the court did not need to decide whether the costs agreement paired with the 2007 deed contravened the Legal Profession Act, and declined to do so.
The Calvos also enjoyed success in their discrete claim against Ellimark Pty Ltd, with the court finding that the company had relinquished its option to purchase a parcel of shares in AIM.