Transitional arrangements for costs provisions of Legal Profession Uniform Law

Further update, 15 February 2017: The Victorian Legal Services Commissioner has formally advised me, and authorised me to tell you, that he will treat the transitional provisions as meaning that where the solicitor’s retainer is governed by the 2004 Act, so too will barristers’ retainers by the solicitor be governed by that Act, even if the brief post-dates the 1 July 2015 commencement of the LPUL.

Update: The position of the post-1 July 2015 briefed barrister briefed by a solicitor retained pre-1 July 2015 is not as clear as I suggested below.  So now it’s me who’s arguably been disseminating misinformation: my apologies.  But it seems to me that there has plainly been a drafting error.  Certain that I knew what the intention of the transitional provision was, I overlooked what the actual words of cl. 18(2) say:

‘If a law practice [read ‘barrister’] is retained by another law practice [read ‘solicitor’] on behalf of another client [read, I would suggest, ‘a client’] on or after [1 July 2015] in relation to a matter in which the other law practice [read ‘solicitor’] was retained by the client before [1 July 2015]—

(a)  Part 4.3 of this Law does not apply in respect of the other law practice [as drafted, this must be a reference to the solicitor, and this is the error] in relation to that matter; and

(b)  in that case the provisions of the old legislation relating to legal costs … continue to apply.’

As drafted, there is no point to the provision.  It is otiose in the context of cl. 18(1), which is said to be subject to sub-clause (2).  It is beyond doubt in my mind that what was intended was a provision cognate with the similar provision in the Legal Profession Act 2004, which is as follows:

‘(2)     Part 3.4 of this Act does not apply in respect of a law practice that is retained by another law practice on behalf of a client on or after the commencement day in relation to a matter in which the other law practice was retained by the client before the commencement day and in that case Part 4 of the old Act continues to apply.’

If the transitional provision as enacted is given its literal meaning, which given the apparent absence of ambiguity might require sophisticated argument to avoid, then the absurd situation will arise where one part of the legal team is regulated by one Act and the other by another.  This may well be a situation where the provision is read to mean something other than what it plainly seems to say in order to avoid an absurd result which parliament could not be taken to have intended.  Nevertheless, the answer should lie in retrospective amendment, and I believe that this problem will now be raised urgently at the highest levels, so I will keep you posted.

Original post: Misinformation about the transitional provisions for the new law regulating legal practice set to commence on 1 July 2015 is circulating around the Bar.  Most people seem to understand that the question of whether the Legal Profession Act 2004 continues to have operation to a solicitor’s retainer after its repeal or whether the Legal Profession Uniform Law applies is answered by working out when instructions were first taken in ‘the matter’.  (Let me digress for a moment. What a ‘matter’ is is not defined in the new Law (or the old Act), and remains a mystery to the world of costs law, although some guidance may be found in Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd [2010] NSWSC 132.  It is not clear that ‘matter’ and ‘retainer’ are co-extensive, and nor is it clear that a ‘matter’ is equivalent in scope to the scope of a ‘costs agreement’ which is applicable: that, I think we can say with some confidence.  Generally, parties may agree as between themselves on what a statute is to be taken to mean.  Those who take a sophisticated approach to handling costs disclosures under the new Law are likely to reduce the scope of their risk by carefully defining what a ‘matter’ is.  More about that anon, perhaps, but the broader the retainer the more difficult the task of estimating total legal fees, and if the ‘matter’ in respect of which disclosure must be given may be attenuated by agreement, that would seem sensible from the lawyer’s point of view.  Clients ought resist such an approach and actually ask what they want to know (e.g. how much might this litigation you’re proposing for me cost if the other side appeals all the way to the High Court and things go as pear shaped as can be imagined, and what are my chances of getting out of it without having to pay the other side’s costs at different points along the way?).)

What seems not to be appreciated is that which law applies to a barrister’s brief by a solicitor (as opposed to a direct access brief) depends on which law applies to the solicitor’s retainer.  So a solicitor first instructed in relation to a matter prior to 1 July 2015 will continue to be governed by the old Act, and a barrister first briefed by that solicitor in that matter (or re-briefed in it for that matter) after 1 July 2015 will continue to be bound by the old Act too.  The transitional provision is cl. 18 of Schedule 4 to the Legal Profession Uniform Law Application Act 2014 and sub-clause (2), apposite to barristers, is set out at the end of the post.

Under the new Law, any breach of the new Law’s disclosure obligations renders the costs agreement void, which is not the case under the present law.  Some barristers will no doubt scoff that they have no costs agreement and say — Who cares? But a backsheet delivered marked with an hourly rate or fixed fee is probably a costs agreement evidenced in writing, and under the new Law, the remuneration payable to a lawyer for work done under a void costs agreement appears to be what is ‘fair and reasonable’ in a special statutory sense according to special statutory criteria, the estimation of which is likely for some time to come to be very difficult, and may not equate to the scale applicable in the court or tribunal as is presently the case.

Putting it delicately, it is not entirely unknown for barristers not to comply perfectly with disclosure obligations.  Accordingly, the new Law is a dangerous place for barristers whose new leaf turning might be imperfect to be operating.  My advice is that barristers and their clerks should do everything possible to ensure that everyone understands that any briefs in fact governed by the old Act are in fact so governed.  Giving disclosures under the new Law in relation to briefs governed by the old Act will give rise to arguments that the barrister is estopped from denying the operation of the new Law.  Whether or not they are meritorious may not entirely determine whether they succeed, and even if they don’t they will be a pain in the neck.  But more to the point, if disclosure is given under the new Law it may amount to non-disclosure under the old Act, with the severe (even if not as severe) consequences of non-disclosure under the old Act (see, e.g., ss. 3.4.17, 3.4.45).

How to fix problems with disclosure

There is likely to be increased activity in relation to challenges to fees post-1 July 2015 because everybody is thinking about the new provisions.  What should a lawyer concerned about his or her compliance with the letter of disclosure law do by way of risk minimisation?  The answer may be: resolve a dispute about fees by accepting a discount in return for a promise that the resolution is a once and for all settlement of the dispute.  That gives rise to an accord and satisfaction and arguably the cause of action to have the fees taxed merges in the accord and satisfaction: see Beba Enterprises Pty Ltd v Gadens Lawyers [2013] VSCA 136.  Whether the right to taxation may be ‘contracted out of’ in that way other than by a ‘sophisticated client’ in light of s. 3.4.26(5) of the old Act (compare s. 180(4) of the new Law) is a question on which the Supreme Court has reserved in a case I argued last week.

Such an accord and satisfaction entered into without a disclosure of the lawyer’s interest in avoiding the consequences of disclosure defaults might be vulnerable to being set aside in equity by reference to the law of fiduciary obligations.

Clause 18(2)

‘If a law practice is retained by another law practice on behalf of another client on or after the commencement day in relation to a matter in which the other law practice was retained by the client before the commencement day—

(a)  Part 4.3 of this Law does not apply in respect of the other law practice in relation to that matter; and

(b)  in that case the provisions of the old legislation relating to legal costs (other than provisions prescribed by the local regulations) continue to apply.’

See also:

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