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Costs disclosure defaults and solicitors’ creditors statutory demands addressed to clients for unpaid fees

April 20th, 2011 · No Comments

In AMI Australia Holdings Pty Ltd v PHD Networks Pty Ltd [2011] NSWSC 161, the NSW Supreme Court’s Associate Justice Macready noted another decision, which illustrates the potential for costs disclosure defaults to be raised as a foundation for a genuine dispute such as to warrant the setting aside of a creditors’ statutory demand for unpaid legal fees.  The decision of Santow J in Callite Pty Ltd v Adams [2001] NSWSC 52 was described as follows:

‘There, a solicitor served a statutory demand demanding payment of an amount of unpaid legal costs. One of the grounds of challenge to the demand was that the solicitor had failed to make the disclosure required by section 175 of the Legal Profession Act 1987 (NSW). Santow J (as his Honour then was) held that this ground of challenge was not available because no facts were deposed to from which one could infer that there was no fee disclosure and the costs agreement. However, the affidavit did deposed to the receipt of accounts and those accounts were annexed. Santow J held (at [10]) that a perusal of the accounts showed that they lacked the prescribed statutory content as required by section 192 of the Legal Profession Act and a regulation 22A of the Legal Profession Regulations 1994 (NSW). Section 192 of the Act precluded any action being taken for recovery of costs until 30 days had passed after the provision of a bill of costs which complied with the Act. Santow J held (at [12]) that the legal consequences which flowed from the form in which the accounts were rendered were not required to be pleaded in the affidavit. His Honour set aside the statutory demand on the basis that public policy precluded a statutory demand being used to bypass the safeguards of the Legal Profession Act.’

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Tags: costs disclosure defaults · Professional fees and disbursements