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What does ‘pro bono’ mean? Are ‘semi-pro bono’ costs agreements legally efficacious?

April 29th, 2014 · No Comments

Hidden away in Trkulja v Efron [2014] VSCA 76, at footnote 49, is a little dictum of the Chief Justice and Justice of Appeal Santamaria which explains their Honours’ understanding of the term ‘pro bono’:

‘In current legal practice, the expression ‘pro bono basis’ is understood to refer to the basis where a practitioner offers his or her services on a voluntary basis without any entitlement to or expectation of remuneration.’

Practitioners should, it seems to me, think carefully before describing themselves as acting ‘pro bono’ when their retainers provide for them to be paid out of the proceeds of a costs order made in favour of their client in litigation to be paid by their client’s opponent in the litigation.

There has been uncertainty in relation to the efficacy of a retainer which says ‘I will charge you $300 per hour but will seek to recover it from you only if you obtain an order that the other party pay your costs, and then I will only seek to recover my fees to the extent of the other side’s liability under the costs order’ or any variation of that concept.

The issue was that the indemnity principle requires total party-party costs to be no more than the liability of the person seeking the costs order to their own lawyers for costs.  If the liability depends on the making of a costs order, until the order is made, the liability is nil,  so that the indemnity principle precludes the making of the order in the first place (so the argument goes).   The latest important decision to endorse this reasoning, albeit in dicta, was King v King [2012] QCA 81.

Now if there is a principle which is properly described as ‘flexible’, it is the indemnity principle in costs law and it is a matter of surprise to me that the uncertainty has persisted so long given the obvious desirability from the perspective of access to justice to sanctioning such arrangements.

Happily, the Supreme Court of Queensland recently gave a decision this year which decided as a matter of ratio that an otherwise orthodox hourly rates costs agreement which included the following special condition was efficacious and did not offend against the indemnity principle:

‘No fees will be payable by you unless an order is made by the Supreme Court of Queensland in your favour for the payment of costs and those costs are recovered by us from other parties and any fees charged shall be limited to the amount of costs so recovered.’

The decision is LM Investment Management Limited (Administrators Appointed) v The Members of the LM Managed Performance Fund [2014] QSC 54.  It distinguishes King v King.

These ‘semi-pro bono’ costs agreements may be ‘conditional costs agreements’, in respect of which the Legal Profession Act 2004 (Vic.) provides additional formal requirements for validity of which commercial lawyers engaged in this kind of pro bono activity ought be wary.

It is not clear to me whether the exception to the costs disclosure obligations whenever ‘the client will not be required to pay the legal costs or they will not otherwise be recovered by the law practice’ (s. 3.4.12(1)(d)) would apply in that circumstance.  On one analysis, the entitlement to party-party costs is the client’s, not the solicitor’s.  The party-party costs are ‘paid’ to the solicitor by the client in satisfaction of the client’s liability for fees even if the client’s opponent in the litigation pays the fees to the solicitor and the solicitor then appropriates them from trust in satisfaction of his or her bill.  Prudence suggests — as the text writers love to say — that disclosure be given to clients who retain solicitors on what I call the ‘semi-pro-bono basis’.  Another label for this concept might be ‘no costs recovery-no fee’ retainers.

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Tags: Costs agreements · No win no fee · Party party costs · pro bono · Professional fees and disbursements