Arbiters Inc Law Corporation v Arokiasamy Steven Joseph & Anor

1 In 2020, the respondents, Mr Arokiasamy Steven Joseph (“Mr Steven”) and his wife, Mdm Tan Kin Tee (“Mdm Tan”), engaged Mr Anil Narain Balchandani (“Mr Balchandani”) of Red Lion Circle Advocates and Solicitors (“Red Lion Circle”) to act for them to sue two doctors and the IMH (collectively, the “defendants”) in HC/S 833/2020 (“S 833”) for an alleged breach of duty and negligence that led to the respondents’ son committing suicide.

2 In November 2020, on Mr Balchandani’s advice, the respondents instructed Arbiters Law to assist Mr Balchandani in S 833. Mr Vijay Kumar Rai (“Mr Rai”) was the lawyer in charge of the matter. The respondents signed a letter of engagement on 25 November 2020 for Arbiters Law to represent them in the action, alongside Red Lion Circle. Subsequently, according to Mr Rai, the respondents decided that it would be prudent for them to be separately represented. Mr Steven signed a fresh letter of engagement on 8 April 2021, whereby he would be represented by Arbiters Law. Mdm Tan remained represented by Mr Balchandani. The letters of engagement dated 25 November 2020 and 8 April 2021 were collectively referred to as the “LOEs”.

3 On 3 December 2021, the respondents discontinued their claim against the second defendant in S 833. Sometime in 2022, Mr Rai realised that his client’s case required additional expert evidence. This led Arbiters Law to engage Professor Eleni Palizidou (“Prof Eleni”), an expert psychopharmacologist. On 12 January 2023, the first day of trial, Mr Rai made a fresh application to file Prof Eleni’s affidavit of evidence-in-chief (“AEIC”). Mr Rai had earlier failed to comply with the Judge’s directions to file Prof Eleni’s AEIC by 25 October 2022. Nonetheless, as Prof Eleni’s expert evidence was crucial to the respondent’s case, the Judge allowed the application and adjourned the trial to 11 September 2023.

4 As it transpired, Arbiters Law and Red Lion Circle were discharged by the respondents on 26 July 2023. Sometime between 27 July 2023 and 1 August 2023, the respondents personally contacted the first and third defendants in S 833 and secured a settlement without admission of liability, wherein the first and third defendants would pay the respondents an ex-gratia sum of $330,000.

5 On 2 August 2023, Arbiters Law filed HC/SUM 2331/2023 (“SUM 2331”), by which it sought (among other things) for the settlement sum to be paid into court by the first and third defendants. On 7 August 2023, the Judge granted leave for Mr Rai and Mr Balchandani to be discharged from acting for the respondents. Thereafter, Arbiters Law filed another summons, HC/SUM 2424/2023 (“SUM 2424”) to be joined as a party to S 833. The Judge dismissed both SUM 2331 and SUM 2424. On 14 August 2023, the court recorded the settlement between the respondents and the first and third defendants, the terms of which are confidential.

6 Arbiters Law subsequently filed HC/OA 1008/2023 (“OA 1008”) against the respondents for payment of its legal costs. Arbiters Law sought a declaration that the LOEs were valid and binding contentious business agreements (“CBAs”) under s 111(1) of the Legal Profession Act 1966 (2020 Rev Ed) (the “LPA”) to compel the respondents to pay the amount it claimed. Excluding disbursements, the combined fees of Arbiters Law were $399,000 and the unpaid fees were $363,000. The total disbursements were $27,483.03 and the unpaid disbursements were $7,417.43. Arbiters Law claimed a total sum of $370,417.43. This was not inclusive of the expert fees claimed for Prof Eleni of £12,300. The Judge held that the LOEs were not CBAs and that Arbiters Law was not entitled to the costs it claimed without an assessment of costs. As the parties agreed that the Judge was to fix the costs of Arbiters Law if the LOEs did not amount to CBAs, the Judge proceeded to do so. The Judge fixed Arbiters Law’s solicitor-and-client costs at $60,000 inclusive of reasonable disbursements, and the sum of $56,065.60 was taken as part payment. The respondents were ordered to pay Prof Eleni’s fees in the reduced sum of $9,000, as the Judge thought that her fees were excessive. In AD/CA 10/2024, Arbiters Law appealed against the entirety of the Judge’s decision in OA 1008.

7 A solicitor and client may have the contractual freedom to enter into a valid agreement for the payment of costs. The significance of entering into a CBA is that, if it is enforceable and enforced, the client loses the right to request for a bill of costs to be issued and sent for assessment (see s 112(4) of the LPA): at [44] and [52].

8 However, the court is conferred a broad supervisory role in assessing legal costs notwithstanding any prior agreement between the solicitor and the client. No action can be brought to enforce such an agreement except by an order of the court. If the terms of a CBA are deemed by the court to be unfair or unreasonable, the agreement may be declared void under s 113(4) of the LPA, and the court may direct that the solicitor’s bill be assessed (see s 113(5) of the LPA). All CBAs must survive the scrutiny of the court: at [45]–[46], [52].

9 Under ss 113(3) to 113(4) of the LPA, the court’s powers would extend to reviewing the implementation of a LOE, in particular, to address overcharging. “[T]he terms of the agreement” as provided for under s 113(4) of the LPA ought to be read broadly when the fee agreement concerned was an agreement as to charge-out rates, so as to encompass a review of how the solicitor had in fact utilised his time on the agreed scope of work to be done by him. Where fees are charged on a time basis, overcharging may occur if the number of hours billed for has been inflated, or where the solicitor enlarged the size of the total bill by deliberately engaging in work unnecessary to achieve the purpose of the retainer or taking an unnecessarily long time for the work by failing to act with reasonable due diligence to increase the actual time taken for the work. Where such instances of overcharging occur, even if the “terms” of the fee agreement per se appear to be fair or reasonable on the face of it, the court may still void the CBA under s 113(4) of the LPA: at [47]–[49].

10 The basis for the court’s supervisory role and power of intervention is the court’s recognition of the unequal relationship between the solicitor and client, and the influence of a solicitor over his client. Further, costs are a major barrier for the ordinary client in getting access to justice. An unfair or unreasonable fee agreement presents a major obstruction in this regard and can undermine confidence in the administration of justice: at [50]–[51].

11 The court held that the terms of the LOEs governing the solicitors’ fees were sufficiently certain and specific. It was significant that cl 22 of the LOEs provided an estimate of the total professional fees. Such a fee estimate went some way in enabling the respondents to know what they were letting themselves in for by way of costs: at [53]–[55], [58]–[62].

12 In principle, a fee agreement between a solicitor and a client, which provides for an agreement as to the solicitor’s charge-out rates (as opposed to a lump-sum fee), could constitute a CBA within the meaning of s 111 of the LPA. However, merely specifying the hourly rates of the assigned solicitors in the agreement, without more, may not always enable the client to make a reasonable forecast as to the total amount of costs to be incurred. Therefore, where possible, such agreements ought to provide a fair estimate of the overall charge: at [56].

13 On the facts, the terms of the LOEs were unreasonable within the meaning of s 113(4) of the LPA. Therefore, the court declared the LOEs void and unenforceable. The fees claimed by Arbiters Law under the LOEs were excessive and amounted to overcharging. First, the total professional fees charged by Arbiters Law far exceeded the estimate in the LOEs. There was no satisfactory explanation for the variance and whether the respondents had been given any prior notice that the fees would be much more than the initial estimate. Second, if Arbiters Law were allowed to claim the full amount of fees, the respondents would be entirely deprived of the settlement sum. Third, the issues in S 833 were not as complicated as portrayed by Mr Rai: at [63]–[70].

14 The Judge’s assessment of $60,000 for Arbiters Law’s solicitor-and-client costs was nonetheless on the low side. It did not adequately take into account the fact that Arbiters Law had acted for the respondents up to the point of having made all the necessary preparations for trial and that the claim involved technical subject matter. The court allowed an uplift to $87,000 instead for Arbiters Law’s professional fees and disbursements: at [71].

15 The Judge erred when he reduced Prof Eleni’s fees by more than half from £12,300 (or $20,541) to $9,000. The court should also be slow to substitute its view for what the respondents had unequivocally stated they were agreeable to. Further, the amount claimed by Prof Eleni was not unreasonable: at [76]–[78].

16 First, Mr Rai was unable to precisely articulate why the respondents had to be separately represented, and he gave contradictory explanations. This made it difficult to accept his explanation that there was a potential conflict of interest that necessitated the respondents’ separate legal representation. The separate representation of the respondents unnecessarily expanded their costs. This reflected on the issue of whether Arbiters Law’s own costs had been reasonably incurred as there was some doubt as to whether the solicitors knew what they were doing even on relatively simple issues: at [79]–[84].

17 Second, Arbiters Law’s conduct of S 833 also appeared to suggest that some of the costs that it claimed were not reasonably incurred. For instance, they only introduced a crucial witness, namely, Prof Eleni, at a late stage. The belated decision to discontinue the respondents’ claim against the second defendant also suggested that Arbiters Law’s conduct of S 833 was not satisfactory: at [86]–[89].

18 Third, Mr Rai ought to have done more in keeping the respondents informed of the escalating costs. Mr Rai conceded that, aside from Arbiters Law’s bills, there was no documentary evidence that, at any point during the proceedings in S 833, he had advised the respondents that the fees were escalating beyond the estimates set out in the LOEs: at [90]–[91].

19 Fourth, before this court, Mr Rai gave the misleading impression that Arbiters Law was amenable to an assessment of costs whereas the respondents were not. It was only after the court probed Mr Rai on this point that he conceded that the respondents had, in fact, been amenable to an assessment of the costs: at [92]–[93].

20 The court was of the view that the conduct of Mr Rai warranted a referral to the Law Society of Singapore, to inquire whether Mr Rai had acted in the interest of the respondents or Mr Steven, and whether Mr Rai had attempted to mislead the court: at [94]–[95].