Applicant brings case beyond jurisdiction; respondent doesn’t take the point until the last minute; no one gets costs

Jasmin Solar Pty Ltd v Fitzpatrick Legal Pty Ltd [2017] VSC 220 is a little case, but it is instructive about a number of things: solicitor-client taxations can take an awfully long time; some businesses probably don’t understand that they are ‘commercial clients’ and so fail to negotiate rights in lieu of the rights to seek taxation which, under the LPUL they no longer have; some lawyers no doubt have standardised disclosures which advise their clients that they have rights which, if they are commercial clients, they do not have; the costs proportionality provisions extend to cases where costs have become disproportionate as a result of a simple oversight by one or other side’s lawyers.

The client sought to tax the solicitors’ costs by a summons dated 26 September 2016.  It seems that there was a dispute about the validity of the costs agreements relied on by the solicitors and the basis on which costs should be taxed in the event that they were void. Four months later, all that had happened was that the lawyers had filed the costs agreements they relied on and the matter had been unsuccessfully mediated.  A ‘preliminary’ hearing was fixed for more than 6 months into the proceeding.  By then many hundreds of pages of affidavits and submissions had been filed.  At three minutes to 5 p.m. on the eve of the hearing, the solicitors emailed new submissions pointing out that the client was a subsidiary of a foreign company and therefore a ‘commercial client’ for the purposes of the definition of ‘government or commercial client’ in the LPUL.

Commercial clients no longer have rights under the LPUL to tax their costs.  The Supreme Court’s inherent jurisdiction was not sought to be invoked in this case, so how a commercial client might use that Court to resolve a dispute about fees has been left unexplored.  If it was consistent with the legislative purpose of the LPUL, the proceeding might have been taken as having been commenced in the Supreme Court more generally.  The Supreme Court is as close as courts come to courts of unlimited jurisdiction in Australia and could have allocated the dispute about fees for determination by an Associate Judge who happened to be the Costs Judge.  That would probably have involved a trip to the Practice Court, but that could perhaps have been achieved by consent.  Authority for that rather modern course is probably to be found in the Civil Procedure Act 2010.  But the dispute would have to be determined by reference to the common law because not only does the LPUL not give standing to commercial clients to seek taxation under the LPUL of their fees, but with a few minor exceptions, the LPUL simply does not regulate costs between commercial clients and lawyers at all.

The solicitor was not a stranger vis-a-vis the client; the solicitor had acted for the client and knew its corporate structure.  The solicitor relied in the Costs Court on a company search which it had carried out a year before seeking taxation.  It showed on its face that the client was the subsidiary of a foreign company.

The Costs Judge decided that neither party was entitled to any order for costs:

’20 The inclusion of review rights in the respondent’s Cost Agreement and invoices cannot confer jurisdiction on the Costs Court if legislation prohibits the applicant from initiating this proceeding.

22 In relation to the question of costs both parties seek costs orders in their favour. The respondent sought indemnity costs and the applicant sought costs ‘in full’. For the reasons that follow there is no justification for either party to receive a favourable costs order.

23 The proceeding has to be dismissed for want of jurisdiction. Ordinarily costs would follow the event, that is, in favour of the respondent. There are several reasons why this should not be the result.

25. …  a potential issue as to the applicant’s standing to invoke the jurisdiction of the Costs Court [apparent from the 2015 search] should have been explored and clarified when the proceedings were initiated in September 2016.

26 … The respondent’s inaction from September 2016 until 6 April 2017 contributed to wasted Court resources and legal costs incurred by the applicant.

27 Additional relevant conduct is that they failed to identify this critical issue in their written submissions filed (late) on 7 March 2017 and they only partially complied with the order of the Judicial Registrar made on 15 November 2016 [requiring filing of costs agreements and disclosure material].

28 Secondly, the respondent’s Cost Agreement and invoices contained words that conveyed to the applicant that there was a right to review costs in the Costs Court. This was misleading and plainly incorrect.

29 Both parties cited breaches of the the Civil Procedure Act 2010 (Vic) (‘CPA’) against each other. The overarching purpose of the CPA is to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. The overarching obligations apply to any party. A party must ensure legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate. The costs incurred are not reasonable and proportionate because the jurisdictional issue should have been identified at the outset given the respondent had the information necessary to identify the issue in their possession. A party must also use reasonable endeavours to act promptly and minimise delay. The respondent has not acted consistently with these obligations.

30 The applicant is also not entitled to costs as the proceeding initiated by it has been dismissed for lack of jurisdiction and it knew what their status was as a subsidiary of a foreign company. The applicant’s legal representatives should have satisfied themselves that the applicant had standing before issuing the proceeding. The CPA provisions referred to in paragraph 29 above apply to the applicant and its legal practitioners. There was not a proper basis to issue the proceeding on behalf of the applicant on the factual and legal material available. [fn:  Section 18(d) CPA].’ (some footnotes omitted)

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