The prudent way to plead a suit for fees

The case which was the subject of the previous post, Quaresmini v Crouch & Lindon (a firm) [2010] FMCA 750, and Chadwick Lawyers v McMullen [2009] FMCA 992, decisions of Federal Magistrates Wilson and Jarrett sitting in Brisbane suggest what I have long suspected: that it is dangerous to use traditional precedents for suing for legal fees.  The relevant bit from Quaresmini is set out in the previous post, and that from McMullen is set out at the end of this post.  Although Federal Magistrates’ views on pleadings may not necessarily be listened to by state courts, the endgame of your suit for fees, bankruptcy, may well be played out there.  Quaresmini is an illustration of how things can go wrong in the endgame.

Before a Victorian solicitor can sue for fees, she must show that 65 days have elapsed since service conforming with the Legal Profession Act, 2004 (Vic.)’s s. 3.4.34(5) of a bill conforming with ss. 3.4.34 and 3.4.35: so says s. 3.4.33. The requirements for clients other than ‘sophisticated clients’ are:

  • the bill must be signed appropriately (generally, by a lawyer);
  • it must be served properly (by post, in person, or delivered to the address of the client or his agent authorised to accept legal process, or left with a person who looks at least 16, apparently living or working at the client or agent’s usual or last known residential or business address, but not by fax or email); and
  • it must include or be accompanied by a written notice (presumably correctly) setting out the options and time limits for challenging it.

These two decisions suggest that at least these matters ought to be pleaded, along with the basis for the claim for fees.  If the basis is a costs agreement, then of course that is a contract which ought to be pleaded like any other contract.  If the basis is a scale, then it may be necessary to plead facts which attract the scale to the work.  If the basis is the fair and reasonable basis, then the fact that there was no costs agreement and no scale applicable would need to be pleaded, at least.

Is anyone else aware of any other authority on this point, or does anyone have experience of this point having been taken?

Furthermore, as my serialised talk on costs disclosure deafults is in the process of explaining to you, there are other hurdles:

  • solicitors may not sue for fees if they have failed to comply with any aspect of the extensive costs disclosure provisions of the Legal Profession Act, 2004; and
  • they may not sue for interest unless the bill which they gave included a notice as to the basis for calculating that interest (even, it seems, if that is a topic specifically dealt with in the costs agreement).

There is a distinction between the first and second sets of hurdles.  Non-achievement of the hurdles in the first set requires the Court to stay the proceedings of its own motion, or upon application.  To enable the Court to comply with the legislative injunction to stay on its own motion proceedings brought in contravention of them, one can see a good case for requiring that compliance with the first set of hurdles be pleaded out.  There is no specific provision providing for a stay of a proceeding which is illegal by virtue of contravention of the requirement that all costs disclosure obligations must have been complied with.  But if the need to plead is common to both sets of hurdles, so that solicitors have to plead compliance with the costs disclosure provisions, and they have to provide a certification of proper factual foundation for that assertion under the Civil Procedure Act, 2010, the suit for fees will be a tricky proposition for many a solicitor.

What the Federal Magistrate said in Chadwick Lawyers v McMullen was:

’25. As well as those factual matters, s.319 Legal Profession Act as I have said only entitles a legal practitioner to recover costs in one of three ways. It is not pleaded in this case that there was any costs agreement and none has been produced.

26. It is not alleged that the costs were recoverable under an applicable scale of costs. Indeed the applicant creditor says that it sought to recover its “usual costs” or their costs at their usual rate. That seems to bring the matter at best for the applicant creditor under s.319(1)(c) of the Act which would require proof that the amount sued for was “fair and reasonable value of the legal services provided”. That fact is not pleaded in the Statement of Claim. If the costs are sought to be recovered and there is a legal bar to doing so unless a precondition is met, one would think that it ought to have been.

27. One must then have regard to s.329 of the Act which provides that legal costs cannot be recovered unless a bill has been served. That in turn requires resolution of the dispute as to whether the applicant creditor’s tax invoice was given to the respondent debtor on 20 February or 20 March. If it was the latter date, it seems to me that s.329(1) of the Act precluded the applicant creditor from commencing its proceedings. The other matter to which attention may be drawn is whether or not s.331 of the Act was complied with. The copy of the tax invoice that is exhibited to the respondent debtor’s second affidavit does not include the written statement that is required by that section nor is there any evidence that the respondent debtor was a “sophisticated client”.

28. It may be that if what is exhibited to the respondent debtor’s affidavit is in fact an account rendered rather than the original invoice, that the written statement formed part of the original invoice. However, it seems to me that there are a number of matters under the Legal Profession Act that also may be raised in the State proceedings.

28. In my view, reference to the matters which I have discussed leads me to conclude that there is a real issue or dispute about the genuineness of the default judgment that has been entered by the applicant creditor against the respondent which requires further investigation.

29. In those circumstances I consider that the respondent debtor who has applied for an adjournment is entitled to that adjournment at least until the determination of his application in the State court.’

See also:

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