IFW Global Pty Limited v Seung Phil Yang t/as Youngs Attorneys

By notice of appeal filed on 31 January 2019, the plaintiff, IFW Global Pty Ltd (IFW) appeals against the judgment ordered by Donnelly LCM on 6 December 2018 in favour of the defendant, Phil Seung Yang trading as Youngs Attorneys (Mr Yang). IFW had claimed an amount of $91,339.32 for services alleged to have been rendered to Mr Yang. The principal basis for his Honour’s judgment was the finding that IFW was not entitled to bring the proceedings by reason of the operation of s 178 of the Legal Profession Uniform Law (NSW) (the Uniform Law) as IFW had provided legal services and had not complied with the disclosure obligations imposed by the Uniform Law. All references to legislation in these reasons are to the Uniform Law unless otherwise stated.

IFW appeals to this Court pursuant to 39 of the Local Court Act 2007 (NSW), which allows a party which is dissatisfied with a decision of the Local Court to appeal to this Court “but only on a question of law”. Although the correct initiating process is a summons, IFW filed a notice of appeal in the Court of Appeal, following which orders were made to refer the proceedings to the Common Law Division without the need for any separate originating process to be filed. The notice of appeal does not fulfil the formal requirements of a summons. However, it was common ground that it was intended to fulfil the same purpose and to constitute an exhaustive statement of the grounds of appeal and the orders sought.

Before turning to the decision of the Court below, I propose to set out the relevant provisions of the Uniform Law.

Section 6 includes the following definitions. The term “law practice” is defined to include an incorporated legal practice. The term “legal costs” is defined to mean:

The term “legal services” is defined to mean “work done, or business transacted, in the ordinary course of legal practice”. The term “engage in legal practice” is relevantly defined to include practising law or providing legal services. A “corporate legal practitioner” is relevantly defined to mean “an Australian legal practitioner who engages in legal practice only in the capacity of an in-house lawyer for his or her employer or a related entity”.

Part 2.1, entitled “Unqualified legal practice”, contains s 10, which prohibits “an entity” from engaging in legal practice unless it is a “qualified entity”, being, relevantly, an Australian legal practitioner or a law practice.

Chapter 3, entitled “Legal practice”, includes s 30 which relevantly provides:

Chapter 3 includes Part 3.2, entitled “Law practices – general provisions”, which contains the following provisions:

Section 38 preserves the “professional privileges of an Australian legal practitioner” who provides legal services and provides that client legal privilege or other legal professional privilege is not excluded, in substance, by the business structure in which those services are provided.

Part 3.7, entitled “Incorporated and unincorporated legal practices”, includes s 103, which provides:

Part 4.3 of the Uniform Law makes provision for legal costs. The objectives of the Part, which are identified in s 169, include:

Division 3 of Part 4.3, entitled “Costs disclosure”, relevantly provides:

Division 6 of Part 4.3, entitled “Unpaid legal costs”, relevantly provides:

The background to the dispute between the parties was that Mr Yang, a legal practitioner, retained IFW to perform services for the ultimate benefit of Korean clients, who were the applicants in proceedings in the Federal Court in which they alleged that they had been victims of an international fraud. On 19 June 2017 Mr Yang accepted IFW’s terms and became liable, subject to the provisions of the Uniform Law, for the payment of invoices rendered by IFW for work performed at his request. IFW purported to perform investigative services but, as part of the overall service provided to Mr Yang, IFW also made available two lawyers, Michelle Huntsman and Ian Taylor, to perform services, which included the preparation of an affidavit evidencing the findings of the investigation. It was contemplated that the affidavit would, after having been settled by counsel, be filed in the Federal Court proceedings in support of the applicants’ case.

As referred to above, IFW rendered invoices to Mr Yang claiming a total amount of $91,339.12. Mr Yang contended that he was not obliged to pay those invoices until costs had been assessed because IFW had not complied with the Uniform Law. He also contended that IFW was prohibited from commencing the proceedings by reason of s 178.

The hearing in the Court below commenced on 31 July 2018. The parties agreed that there would be no cross-examination of any witness but that the affidavits of Mr Gamble and Mr Yang would be read subject to objections. After the evidence, which was entirely documentary, was closed, the parties addressed his Honour. At the conclusion of the hearing, his Honour listed the matter for judgment on 27 September 2018. A timetable was ordered for further written submissions. IFW filed written submissions on 15 August 2018 and Mr Yang responded by submission filed on 28 August 2018. On 25 September 2018 his Honour requested that the parties address in written submissions, first, the issue whether legal professional privilege attached to any of the work done by IFW for Mr Yang; and, secondly, authorities cited by his Honour on the question of what constituted “legal services”. On 27 September 2018 the Court below made the following directions:

On 11 October 2018 IFW filed written submissions which addressed the question of client legal privilege and the authorities cited by his Honour. On 17 October 2018, IFW maintained its position that none of the services provided to Mr Yang were legal services. It did not provide any assistance to the court as to how the apportionment between legal services and non-legal services ought be made. IFW submitted, relevantly:

Mr Yang filed submissions in response on 25 October 2018, which concluded as follows:

Counsel in the Court below agreed that the following five issues, which were proposed on behalf of Mr Yang, arose for determination by the magistrate:

The Court below answered question (1) “Yes” and question (2) “No”. His Honour did not proceed to answer any of the further questions as they did not arise.

As to the first issue, Mr Yang submitted that the services which IFW had provided to him included legal services, which obliged IFW to comply with the disclosure obligations in ss 174 and 175 of the Uniform Law. Mr Yang argued that, as IFW had not complied with those obligations, he was not, by reason of s 178, required to pay the amounts claimed in IFW’s invoices as the invoices include legal costs which had not been assessed and any costs dispute had not been determined. IFW argued that it was an investigation firm, which provided investigative services which were not legal services and that therefore it was not bound to comply with the Uniform Law and could recover the amounts claimed in accordance with the ordinary principles of contract law.

The Court below found that “[a]n analysis of the proposal, the express terms of the agreement and the invoices submitted by the plaintiff all lead to an unassailable conclusion that part of the monies claimed by the plaintiff related to the provision of services in the nature of legal services”: [41]. His Honour’s findings were based on the following evidence, which is summarised in [42]-[43] of the reasons:

In the Court below, IFW argued that neither IFW nor Ms Huntsman was a “legal practice” for the purposes of ss 178 or 194. IFW submitted further that s 178 did not operate as a bar to the proceedings even if some of the services it provided were found to be legal services. It submitted that Mr Yang was required to prove that all of the services included in the invoices claimed were “legal services” before it could be concluded that the proceedings were barred by s 178.

In the Court below, Mr Yang relied on the circumstances that Ms Huntsman was registered as a legal practitioner and held a practising certificate as a “Corporate Legal Practitioner (Supervised)” in support of his contention that she was a “legal practice”. Mr Yang submitted that, although the evidence did not establish that Mr Taylor was supervising Ms Huntsman, the inference was available since his charge-out rate ($650 per hour and $4,500 per day) was significantly higher than hers ($350 per hour and $2,450 per day). Mr Yang submitted that if any part of IFW’s claim comprised legal costs, IFW was prohibited by s 178 of the Uniform Law from commencing proceedings to recover the amounts invoiced.

The Court below found that Ms Huntsman was a “law practice” within the meaning of the definition in s 6 of the Uniform Law. His Honour rejected IFW’s submission that legal costs must be “identified and quarantined” by him. His Honour’s conclusions appear from [58] of the reasons:

His Honour raised a further issue in the following passage from the reasons:

IFW relies on the following grounds of appeal:

Mr Bedrossian, who appeared on behalf of Mr Yang, contended that grounds 4, 5, 6, 7, 8, 9, 11, 16 raise purely factual questions in respect of which this Court has no jurisdiction. He submitted that grounds 1, 2, 3, 10 and 14 raise questions of mixed fact and law in respect of which an appeal lies only by leave: s 40 of the Local Court Act. He submitted that, although ground 15 would appear to raise a question of law, in substance it raises either a question of fact or a question of mixed fact and law because it seeks to challenge his Honour’s conclusion that IFW failed to satisfy the evidentiary onus regarding the fees that related to the provision of non-legal services.

Mr Duc, who appeared on behalf of IFW, confirmed at the outset that IFW did not seek leave to appeal on any ground but relied solely on its rights pursuant to s 39 of the Local Court Act. He maintained this position throughout the hearing. He argued that the grounds raised a question of law because they challenged inferences from primary facts, rather than the primary facts themselves, which he contended were largely uncontroversial. In support of this submission Mr Duc relied on the following extract from the judgment of Mason CJ in Australian Broadcasting Corporation Tribunal v Bond (1990) 170 CLR 321 at 355; [1990] HCA 33:

Mr Duc submitted, on the basis of this extract, that the inference drawn by the magistrate that, for example, Ms Huntsman was a “legal practice” raised a question of law because it was an inference drawn from facts found or agreed: namely, that she had a practising certificate and described herself in correspondence as an “in-house lawyer”.

I reject this submission which I regard as based on a misapprehension of Mason CJ’s judgment in Australian Broadcasting Corporation Tribunal v Bond. In order to understand the true import of his Honour’s judgment, it is necessary to read what Mason CJ said in the passage following the extract relied on by Mr Duc, which was:

In oral argument, Mr Duc confirmed that where a factual finding was challenged in a ground of appeal, it should be understood as an allegation that it was not open to the magistrate to make the finding. Whether a factual finding is open to a decision-maker is a question of law: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156 (Glass JA, Samuels JA agreeing). It therefore falls within this Court’s jurisdiction under s 39 of the Local Court Act. However, the jurisdiction under s 39 does not permit me to embark on any review of the decision-making process of the Local Court beyond that necessary to answer the appropriately identified questions of law: Rose v Tunstall [2018] NSWCA 241 at [29]-[32] (Payne JA, Basten JA and Simpson AJA agreeing).

Subject to the qualifications expressed below, I accept Mr Bedrossian’s submissions as to the classification of the grounds. However, in light of Mr Duc’s concession as to the gloss that can be applied to the grounds to ask whether a particular finding was open to the Court below, I propose to address the grounds on that basis.

Ground 18, although expressed as a ground, is an application for an extension of time. Mr Bedrossian indicated that no objection was taken to time being extended. In light of Mr Yang’s attitude, I propose to extend time for the originating process to be filed.

Mr Duc accepted that grounds 1-9 and 11 essentially raised the same issue and could conveniently be dealt with together. In effect, these grounds, with the gloss referred to above, raise the question whether it was open to the Court below to find that IFW and/or Ms Huntsman, as a “law practice”, provided legal services for which legal costs were charged to Mr Yang by IFW and which formed part of the amount claimed in the proceedings in the Court below.

It was common ground that there had been no compliance with ss 174 or 175 of the Uniform Law either by IFW or Ms Huntsman. It was also common ground that the work Ms Huntsman performed as an in-house lawyer at IFW was included in the invoices sent to Mr Yang which were the subject of the proceedings.

Mr Duc accepted in oral argument that Ms Huntsman was “using her legal experience and skills” when she performed work for IFW in performance of its contract with Mr Yang but contended that the work ought properly be classified as investigative work and was not legal work. He argued that although Ms Huntsman was drafting Mr Gamble’s affidavit, she was not in a position to file the version she had drafted as it would be submitted to Mr Yang and the counsel he retained before it was filed. Mr Duc stressed that it was Mr Yang and not Ms Huntsman who controlled the form in which the affidavit would be filed. He submitted that the work Ms Huntsman performed ought take its character from the person for whom she performed it, being Mr Gamble, the lead investigator, and that it ought not be inferred that she was providing legal services when Mr Yang himself was a lawyer and counsel had been retained. Although Mr Duc accepted that Ms Huntsman was described in IFW’s proposal to Mr Yang, in the invoices, and in correspondence as an “in-house lawyer”, he submitted that her title was not necessarily indicative of her role.

The evident intention of the provisions of the Uniform Law referred to above is that lawyers be permitted to work in whatever business structure is suitable but that their role and the substance of the work determine their obligations and privileges rather than the structure: Commonwealth Bank of Australia v Hattersley (2001) 51 NSWLR 333; [2001] NSWSC 60 at [17]-[21] (Davies AJ). Further, the question whether proceedings are “proceedings for the recovery of any or all of the legal costs” is also to be determined as a matter of substance: Burbridge v Wolf [2008] NSWSC 60 at [36]-[40] (Nicholas J).

The question whether Ms Huntsman is a “law practice” who is providing legal services to Mr Yang or to his ultimate clients, is to be determined by reference to the work she has done. It is not to be determined by reference to the identity or qualifications of her supervisor or employer. Nor is the answer to the question dependent on whether she has contracted directly with Mr Yang or whether her contract of employment or services is with another entity which has a contractual relationship with Mr Yang. Further, s 103 makes it clear that the fact that IFW may also provide investigative services to clients does not mean that it cannot also provide legal services to its clients, including the same clients to which it provides investigative services. A misapprehension as to the effect of s 103 would appear to underpin ground 4.

As the reasons of the Court below set out above indicate, his Honour’s finding that Ms Huntsman, as a “legal practice”, was providing legal services which were included in the invoices rendered by IFW to Mr Yang, was based on her qualifications as a legal practitioner and her holding a current practising certificate; the way in which she was described in the proposal, correspondence and invoices; and the descriptions of the work she performed. This work included drafting Mr Gamble’s affidavit and reviewing pleadings. His Honour was entitled to take into account that Ms Huntsman had not given evidence. Thus there was no evidence that undermined her title or the description of the work in the documents. The maxim that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” applied: Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969 at 970. I am satisfied that it was open to the Court below to be satisfied of these matters based on this evidence. This is sufficient to address the first category of grounds, as reworded, based on Mr Duc’s concession and the circumstance that no leave to appeal is sought.

There is considerable force in Mr Bedrossian’s submission that ground 10 raises only a question of fact. To the extent to which there is a legal kernel in the ground it raises the question whether the Court below was entitled to take into account that IFW had not called evidence to qualify or contradict the inferences which were available from IFW’s documents (the proposal, the invoice and Ms Huntsman’s sign off title on correspondence). The maxim from Blatch v Archer extracted above sufficiently answers this ground. A tribunal of fact is entitled to take into account whether the party against whom an inference is open has given evidence to contradict or qualify that inference, particularly where it is peculiarly in the power of that party to do so. Therefore, to the extent to which ground 10 raises a question of law, the ground has not been made out.

Alleged inadequacy of reasons raises a question of law. Mr Duc submitted that his Honour’s reasons in [60] of the judgment were insufficient to explain why IFW had not discharged the onus of proving what part of its claim related to non-legal services. It is well-established that reasons must be read fairly as a whole: Small v K & R Fabrications (W’gong) Pty Ltd [2016] NSWCA 70 at [53]-[54] and [73] (Basten JA, McColl and Simpson JJA agreeing). It is plain from the terms of [60] and the judgment as a whole that his Honour had made all relevant findings in the paragraphs up to and including [58]. His Honour had found that IFW and/or Ms Huntsman, as “legal practice[s]”, had provided legal services and that the invoices rendered by IFW to Mr Yang included legal costs. His Honour found that the commencement of the proceedings was barred by s 178 of the Uniform Law because the costs had not been assessed.

In [59]-[60], his Honour explained why he did not make an alternative finding as to what portion of the amount claimed related to non-legal services. As I read the reasons of the Court below, his Honour was endeavouring to comply with the obligation placed on judicial officers at first instance to make all relevant findings of fact to avoid further litigation if an appellate court corrects an aspect of the decision below. This obligation most often arises where the primary judge has decided against the plaintiff on liability but is expected to quantify damages: Wolfenden v International Theme Park Pty Ltd (trading as Wonderland) [2008] NSWCA 78 at [3]-[4] (Giles JA) and [53] (Hodgson JA). Since this part of his Honour’s decision was obiter, it does not give rise to a ground of appeal.

Mr Duc accepted that IFW had not at any time up until judgment was delivered by the Court below departed from its primary position that all of the amounts claimed were for “investigative services” and none was for “legal services” and conceded that IFW had not sought to disentangle any portion of the amounts claimed on that basis. Although some of the services listed in the invoices were legal services, some might have been investigative or legal depending on the precise ambit of the task. This task could not have been performed without more evidence. The onus rested on IFW. It was open to his Honour to find that IFW had not established what part of the total amount claimed was not referable to legal costs.

Ground 14 repeats some of the aspects of grounds 1-9 and 11. While I accept Mr Bedrossian’s submission that the question involved is a question of mixed fact and law in respect of which leave is required and has not been sought, there is a discernible question of law within ground 14. This legal question is whether IFW could recover amounts claimed in the invoices which were not legal costs if any of the amounts claimed in the invoices were legal costs. As his Honour found, IFW did not undertake this task at all. There are strong policy reasons why it would be inappropriate for a court in recovery proceedings to be required to undertake this task: see Lewis v Doran [2008] NSWSC 186 at [44]-[78] (Hammerschlag J). In the present case, this question was moot since IFW, being the party which bore the onus of proof, did not attempt to differentiate which items on the invoices were for legal services and which were not.

Mr Duc submitted that, on proper analysis, Orrong Strategies Pty Ltd v Village Roadshow Ltd [2007] VSC 1; (2007) 207 FLR 245 (Orrong) did not establish any relevant principle since the passage extracted in his Honour’s reasons was merely a reference to a party’s argument in that case. It is apparent from the passage from Orrong which was extracted in the reasons of the Court below that his Honour was referring to an argument put in that case, rather than to what was decided. However, the “principle” to which his Honour referred was, in essence, equivalent to the maxim in Blatch v Archer quoted above, which is a principle of general application which is often cited in different contexts. For example, the plurality (Kiefel CJ, Keane, Nettle and Edelman JJ) said in M47/2018 v Minister for Home Affairs [2019] HCA 17; (2019) 93 ALJR 732 at [40] in the context of an unlawful non-citizen:

The relevance of the principle to the present case is plain. IFW knew what services had been provided in greater detail than appeared from the invoices it rendered to Mr Yang. It provided no further detail than appeared in them and relied on the bland assertions in Mr Gamble’s affidavit that the services were “investigative services”. His Honour applied the well-established principle in deciding that the disentanglement between amounts charged for legal services and those charged for non-legal services was part of IFW’s onus of proving the amounts to which it was entitled. I discern no error of law in his Honour’s approach. This ground has not been made out.

Although ground 16, as formulated, raises a purely factual question, Mr Duc raised the legal question whether Mr Yang’s status as a legal practitioner was relevant to the issues to be determined. He submitted that Mr Yang was in a position to know of the provisions of the Uniform Law and to require that IFW make disclosure to him, if he sought it. Although Mr Duc maintained the submission, he was unable to point to anything in the Uniform Law which would authorise differential obligations being imposed depending whether the “client” was legally qualified.

The only relevant distinction drawn by the Uniform Law between legal services provided to a client and those provided to another law practice appears in ss 174 and 175. A law practice is required, by s 174, to make certain disclosures to a client. Under s 175 a law practice (the second law practice) retained by another law practice (the first law practice) is required to make disclosures to the first law practice (so that it can make disclosure to the client under s 174) but not to the client directly.

In the present case, Mr Yang was, as Mr Duc accepted, relevantly, a “client”, since the agreement with IFW was with him and not with the ultimate clients (being the Korean clients). In light of his Honour’s findings, Mr Yang was, as the “client”, entitled to disclosure from IFW under s 174. However, as Mr Yang was also, relevantly, “a law practice” and had, on his Honour’s findings, retained “another law practice” (IFW), IFW was obliged to make disclosure to Mr Yang under s 175. For present purposes, it did not matter whether s 174 or s 175 applied since each section imposed disclosure obligations on IFW with which it has not complied.

Legislation governing the conduct of legal practitioners has long since made provision for disclosure of the basis of fees charged by lawyers to clients. There is no justification either in the terms or the policy of the Uniform Law and its statutory predecessors or in the authorities for legal practitioners themselves to be disentitled to the level of protection afforded to others to whom legal services are provided. The exemption postulated by Mr Duc is inconsistent with the purpose of the provisions. In Zizza v Seymour [1976] 2 NSWLR 135, the Court of Appeal considered s 21 of the Legal Practitioners Act 1898 (NSW) which provided that “no solicitor … shall commence or maintain any action or suit for the recovery of any fees, charges or disbursements for any business done by such solicitor until the expiration of one month after a bill of such fees, charges or disbursements” has been delivered to the party to be charged. Moffitt P said at 139:

I discern no legal error in his Honour’s approach. Ground 16 has not been made out.

None of the grounds which fall within this Court’s jurisdiction under s 39 of the Local Court Act has been made out. The parties agreed that if Mr Yang was successful, IFW ought be ordered to pay his costs of the proceedings in accordance with the general rule that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.

For the reasons given above, I make the following orders: