Solicitor’s creditors statutory demand set aside because of alleged non-compliance with costs disclosure obligations prior to settlement of client’s case

In IMO Speedy Loans Pty Ltd [2014] VSC 273, a Victorian law firm delivered a creditors statutory demand to a company which was its former client.  The client convinced Gardiner AsJ to set it aside exclusively by reference to an argument that by virtue of s. 3.4.17(1) of the Legal Profession Act 2004, the client was not yet obliged to pay the fees, no taxation (‘costs review’) having yet occurred.  That was because there was an alleged failure to comply with the s. 3.4.16 requirement to provide costs estimates prior to the negotiation of the compromise of a litigious proceeding.

The lawyer involved swore that he had done so orally and the client swore that the lawyer had not. There was, accordingly, a genuine dispute as to the indebtedness of the company and the statutory demand had to be set aside. Lesson: give written disclosures even when writing is not specifically required.  And be very sure of perfect compliance before suing for fees or issuing a creditors’ statutory demand.  Otherwise, seek taxation of your own costs, following which the Costs Court will ordinarily make an order for payment of the taxed sum (or simply write off the fees as uncommercial to recover).

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