The Great Transitional Provisions Debacle #2

The Legal Profession Uniform Law commenced in Victoria and NSW on 1 July 2015. The Legal Profession Act 2004, which created the statutory office of Legal Services Commissioner was repealed at the same time, though transitional provisions gave the Act, and the office, ongoing operation. As explained by my last post, the new statutory office of Victorian Legal Services Commissioner was created. The Legal Services Commissioner was to tidy up part-complete complaints and disputes unless regulations specified a substitute (e.g. the Victorian Legal Services Commissioner). No such regulation was made until just the other day. Michael McGarvie retired. Fiona McLeay was appointed Victorian Legal Services Commissioner in February 2018.

All new complaints were to be made to the Victorian Legal Services Commissioner, or so it seemed. Transitional provisions are found in Schedule 4 of the LPUL. Clause 27 appears to state specifically what is to happen in the case of a complaint first made post-LPUL about pre-LPUL conduct, whether the complaint is characterised as a simple consumer matter, a consumer matter which is a costs dispute, a disciplinary matter, or some combination of those things. It commences:

This clause applies to conduct that– (a) happened or is alleged to have happened before the commencement day; and (b) could have been, but was not, the subject of a complaint (or, if relevant, a request for dispute resolution).

If that condition is satisfied, the investigation may be commenced under the LPUL. Then the LPUL applies ‘with the necessary modifications’, so long as ‘an investigation of the relevant kind could have been commenced under the [Legal Profession Act 2004] in relation to the conduct had the old legislation not been repealed.’ The Victorian Legal Services Commissioner can’t take disciplinary action which is more onerous than the Legal Services Commissioner could have taken under the 2004 Act. Whatever ‘disciplinary action’ means, it is unlikely to refer to action taken in or following an investigation of or attempt to resolve a complaint to the extent that the Commissioner characterises it as a ‘consumer matter’, rather than a ‘disciplinary matter’.

The language is a bit vague because it had to deal with the transition between two different states’ Acts which were repealed and substituted with the LPUL. Perhaps it is that vagueness which has had an unfortunate result. That result is that the Costs Court has made a ruling which the Victorian Legal Services Commissioner interprets as depriving her of LPUL jurisdiction to deal with complaints she characterises as consumer matters where the conduct in question pre-dates 1 July 2015 and perhaps even where the conduct in question post-dates 1 July 2015 but is in relation to a matter in which instructions were first taken before 1 July 2015.

The consequence is that since the Costs Court’s decision, consumers with complaints about their lawyers’ pre-1 July 2015 conduct have been deprived of rights they might reasonably think parliament intended to bestow on them, including the right to have expert, costs-free, extra-curial determination by the Victorian Legal Services Commissioner of costs disputes and negligence claims, the right to have consumer matters ‘investigated’, and the right to go to the Commissioner’s office with disputes where the total fees are up to $100,000 or more, instead of only disputes where the fees are up to $25,000.

The LPUL wrought big changes in this space in Victoria. Previously, the Legal Services Commissioner could only attempt to resolve what were called under the Legal Profession Act 2004 ‘civil complaints’ (the species of which were ‘costs dispute’, ‘pecuniary loss dispute’, and ‘other genuine dispute’). if he failed, the parties had to fund and bring VCAT proceedings themselves, exposing themselves to the risk of an adverse costs order. Under the LPUL, the Victorian Legal Services Commissioner is made into a decision maker, the go to decision maker for disputes about comparatively small amounts of fees ($10,000 or less).

The Commissioner must deal with all complaints properly made: s. 315. She can investigate and deal with complaints which she characterises as costs disputes where the total fees are less than $100,000 or where the fees which are in dispute are $10,000 or less excluding GST. She can make determinations in relation to disputed costs of up to $10,000 plus GST. (It is not the case that her dispute resolution and investigation powers are available only where the total fees are $10,000 or less or the amount of fees in dispute is less than $10,000. All that is limited is her power to make a binding decision. Investigation using her powers of compulsion, and expert free dispute resolution services are still of enormous benefit to punters even if, at the end of those processes, they still have to go off to the Costs Court or VCAT to have their costs dispute determined.)

The purpose of this post is to consider the Costs Court’s decision, Sullivan v Snodgrass, unreported, 23 October 2017 (I can send you a copy), and the Victorian Legal Services Commissioner’s interpretation of it. I conclude that there are arguments to be made against the finding made by the Costs Court, and in any event, the Court’s reasoning can have operation only in relation to post-1 July 2015 complaints about legal costs because the reasoning depends on cl. 18 of the transitional provisions, and that clause only preserves the operation of provisions relating to legal costs. Even while the Costs Court’s decision stands, the Commissioner would appear to have full power under the LPUL to investigate, attempt to resolve, and determine post-1 July 2015 complaints about pre-1 July 2015 conduct except to the extent that the complaint falls within the 2004 Act’s provisions about civil complaints which are costs disputes. Very likely, the Victorian Legal Services Commissioner could circumvent this finding of the Costs Court by characterising a post-1 July 2015 complaint about a matter in which instructions were first given before 1 July 2015 as a disciplinary complaint.

Why the powers that be didn’t fix this problem while they were fixing the Great Transitional Provisions Debacle #1 is a mystery to me.

John Snodgrass is a Melbourne solicitor. He acted for Mr Sullivan in relation to a deceased estate and in relation to a dispute over fees with Mr Sullivan’s previous solicitor. He first received instructions in both matters prior to 1 July 2015, when the LPUL commenced. So the ‘provisions of the [Legal Profession Act 2004] relating to legal costs continue[d] to apply’: LPUL, Sch. 4, cl. 18(1)(b). Take note of that provision, which I will refer to as ‘cl. 18’ below. It is one of the protagonists in a showdown between cl. 18, and cl. 27 which I introduced at the beginning of the post.

Mr Snodgrass gave bills all of which post-dated the commencement of the LPUL, though presumably some of the work billed for was done before 1 July 2015.

In 2016, Mr Sullivan first made a complaint to the Victorian Legal Services Commissioner which she must have characterised as a consumer matter which was a costs dispute, and she presumably went about attempting to resolve it. She did so under the LPUL, no doubt on the basis either that the work and the bills complained about occurred at least in part after 1 July 2015 and/or on the basis that work which pre-dated 1 July 2015 could be dealt with under the LPUL ‘with necessary modifications’, pursuant to cl. 27.

Soon after making his complaint, Mr Sullivan withdrew it and commenced taxation in the Costs Court. To use the language of the 2004 Act, which is the statute Mr Sullivan invoked to seek taxation, he sought ‘review of the legal costs’ charged by Mr Snodgrass. After a long time, Mr Snodgrass belatedly said ‘Wrong way! Go back. Ain’t got no jurisdiction. You elected to go down the Commissioner route, and you can’t seek taxation after that: s. 3.4.48 of the 2004 Act still applies because cl. 18 says 2004 Act “provisions relating to legal costs” like s. 3.4.4.8 continue to apply.’

Section 3.4.48 said:

‘Legal costs subject to a civil complaint are not reviewable
Despite anything to the contrary in this Part, legal costs that are or have been the subject of a civil complaint under Chapter 4 may not be the subject of a costs review under this Division.’

Mr Snodgrass retorted ‘Problemo! These costs have not been the subject of a civil complaint under Chapter 4 of the Legal Profession Act 2004. All that happened was that I made a complaint under the LPUL which did not proceed because I withdrew it.’

The Costs Judge said whether it proceeded or not, and whether the Commissioner determined it or not, was irrelevant. The irreversible election between Commissioner and Costs Court occurs when the complaint is made, so long as it is validly made. He found in this case it was validly made, because the costs in each of the two matters were less than $25,000 (a determination which required him to work out how much of each bill which mixed up work in both matters was attributable to each matter). This ruling as to the timing of the election is a useful clarification of the law which may be presumed to have operation in relation to the LPUL equivalent of s. 3.4.48, s. 197.

Here is where it gets interesting. The Costs Judge found that the Victorian Legal Services Commissioner got it wrong when dealing with Mr Sullivan’s complaint under the LPUL. As a matter of law, Mr Sullivan’s complaint was a civil complaint under Chapter 4 of the 2004 Act, his Honour found. It is this finding which is problematic for the Commissioner and the punters of Victoria. ‘The language [of cl. 18] is unambiguous’, his Honour said at [27]. ‘Any provisions in the [2004 Act] “relating to legal costs” continue to fall within the ambit of the [2004 Act]. There is no distinction as to whether it is assessment of legal costs, disclosure in relation to legal costs, or complaints about legal costs. … Therefore a complaint to the VLSC, even though made after 1 July 2015, is in reality a complaint under the [2004 Act].’

Clause 27 had ‘no application’ (at [30]). His Honour said ‘First a complaint is not necessarily equivalent to a civil complaint / costs dispute under the [2004 Act] and, even if it was, the clause does not apply if it “could have been, but was not the subject of a complaint”. At law the costs in dispute were the subject of a complaint to the VLSC under Chapter 4 of the [2004 Act]. At law the complaint was made under the auspices of the [2004 Act].’

The Court also took comfort at [22] et seq from other provisions, treating as an accrued right Mr Snodgrass’s ‘right not to be subjected to both’ a taxation and a civil complaint, repeal of which would require clear legislative intention. It must be said that that was a most inchoate right on 1 July 2015, since Mr Sullivan had not yet made a civil complaint on that date. Cl. 27 applies the LPUL to post-1 July 2015 complaints about pre-1 July 2015 matters with ‘necessary modifications’. Presumably that means that s. 197, the equivalent of the 2004 Act’s s. 3.4.48 prohibition on seeking taxation when you’ve already been to the VLSC under the LPUL, could be read so as to prohibit taxations when you’ve already been to the LSC under the 2004 Act. This reasoning, which does not seem to have been determinative, is not the focus of this blogpost, which is probably already boring and complicated enough.

There are five arguments against the Court’s analysis in the cl. 18 v cl. 27 showdown which occur to me. In full fairness to the Court, it is not apparent that all of them were made to the Costs Court. Indeed Mr Sullivan’s counsel volunteered the proposition that the Victorian Legal Services Commissioner may have erred in dealing with Mr Sullivan’s complaint under the LPUL, a concession for which she was commended by the Court for its frankness. Had anyone grasped the implications of all this, they might have suggested that the VLSC be invited to make submissions. But she wasn’t.

VLSC has no powers under 2004 Act First, civil complaints which were costs disputes were to be made under the 2004 Act to the Legal Services Commissioner, a statutory office which in reality ceased to exist upon the repeal of the 2004 Act, except to the limited extent provided for by transitional provisions, and legally distinct from the office of Victorian Legal Services Commissioner created for the first time by the LPUL. Whereas continuity of legal personality was specifically given by parliament to the Legal Services Board (s. 28, Legal Profession Uniform Law Application Act 2014 (Vic.)), parliament did not provide for continuity of operations of the Legal Services Commissioner such that the Victorian Legal Services Commissioner could treat the new office as simply a ‘rebranding exercise’. This seems now to be accepted by the powers that be: otherwise there would have been no need for the retrospective legislation discussed in this post. So the Victorian Legal Services Commissioner, an office unheard of when the 2004 Act was in operation, has no powers under the 2004 Act, and a complaint made to the Victorian Legal Services Commissioner could not as a matter of law have been treated as a complaint under the 2004 Act.

There is ambiguity Secondly, there is ambiguity in cl. 18 if one takes the construction of cl. 18 which the Costs Judge took. On that basis, cl. 18 says where instructions were first taken before 1 July 2015, the 2004 Act’s provisions about costs, including provisions about civil complaints which are costs disputes, continue to apply. On the other hand, cl. 27 says complaints about pre-LPUL conduct first made after the LPUL’s commencement (apparently including those which the Victorian Legal Services Commissioner characterises as consumer matters which are costs disputes) may be dealt with under the LPUL with necessary modifications.

If one were to take cl. 18’s reference to ‘provisions relating to legal costs’ as a reference to the provisions in the 2004 Act within Part 4.3, which is headed ‘Legal Costs’ (as opposed to all provisions which are in some way about costs, including those in Part 5, ‘Dispute Resolution and Professional Discipline’, Division 3, ‘Further provisions applicable to costs disputes’) then the battle of the transitional provisions would not arise, and I must confess that is how I had always assumed without thinking about it too much that cl. 18 would be interpreted.

Part of the problem may be that the language of clause 27 sounds like it is directed towards the investigation of disciplinary complaints. It speaks mainly of ‘investigation’ of ‘complaints’ which evokes in the minds of those familiar with the 2004 Act and its predecessor the disciplinary realm. Under the 2004 Act, the Legal Services Commissioner could attempt to resolve ‘civil complaints’, which included ‘pecuniary loss disputes’ (e.g. claims for compensation for negligence), ‘other genuine disputes’ (e.g. disputes about access to client files) and ‘costs disputes’ about costs of $25,000 or less. But when he did so, he was not described as ‘investigating’ the civil complaint, and on those occasions where the alleged conduct would not if established amount at least to unsatisfactory professional conduct and so also amount to a disciplinary complaint he did not have the coercive powers to compel the production of documents and information as the Victorian Legal Services Commissioner has in complaints she characterises as consumer matters, and he did not have power to determine the complaints: VCAT had that power.

But it is clear that cl. 27 is intended to have operation in relation to complaints which are characterised as consumer matters as well as to complaints characterised as disciplinary matters. First, it is within Division 7 of the Schedule 4 transitional provisions, which is titled ‘Dispute resolution and professional discipline’. Secondly, cl. 27(1)(b) refers not only to complaints but ‘if relevant, a request for dispute resolution’ (even though in Victoria, requests for dispute resolution were made under the 2004 Act by the lodgement of a civil complaint.)

And it is important to note that under the LPUL, the Victorian Legal Services Commissioner has the power to ‘investigate’ complaints whether she characterises them as consumer matters or disciplinary matters or both (see s. 282), and the power to determine them by ordering compensation or requiring the lawyer to waive or reduce their fees. All the powers she has to investigate disciplinary complaints are also available to her in relation to costs disputes and all other species of complaints which she characterises as consumer matters (see s. 282, s. 466, and s. 6’s definition of ‘complaint investigation’). The VLSC can now make a binding determination in relation to a costs dispute if at the end of her processes the amount still in dispute is $10,000 or less, which the LSC could not do under the 2004 Act.

What is a ‘complaint’ for cl. 27 purposes? Thirdly, it is unclear what the Court meant by observing that ‘a complaint’ referred to in cl. 27 ‘is not necessarily equivalent to a civil complaint / costs dispute under the 2004 Act.’ Under the 2004 Act, punters could make disciplinary complaints or civil complaints, the latter including pecuniary loss disputes, costs disputes and ‘any other genuine dispute’. Under the LPUL, punters can make ‘complaints’ which the Victorian Legal Services Commissioner can characterise as (a) a ‘consumer matter’ (including pecuniary loss disputes, costs disputes, and any other dispute between a lawyer and client) (b) a ‘disciplinary matter’ or (c) both: s. 269, 271. All sounds pretty same same.

There was no previous complaint Fourthly, it is unclear what the Court meant when it said:

‘[clause 27] does not apply if it “could have been, but was not the subject of a complaint”. At law the costs in dispute were the subject of a complaint to the VLSC under Chapter 4 of the [2004 Act]. At law the complaint was made under the auspices of the [2004 Act].’

That limb of cl. 27 requires the complaint under consideration to be assessed: could it have been the subject of a complaint? Has it been the subject of a previous complaint? The answer must have been — no, it has not been the subject of a previous complaint. The complaint under analysis (in this case made well after the LPUL’s commencement) cannot itself be the previous complaint.

Chaotic consequences of Court’s interpretation Fifthly, the practical results of the Court’s analysis are such that it is unlikely the draftsperson intended them. All matters where instructions were first taken before 1 July 2015 (and believe me, there are still a lot of them) would be subject to regulation by two different statutes when it comes to Commissioner complaints. Conduct, even conduct which post-dates 1 July 2015, could only be complained about under the 2004 Act to the extent that the complaint relates to costs. Since you can have a disciplinary complaint about costs (e.g. failure to give disclosure, entering into an illegal costs agreement, gross overcharging), on one view, even disciplinary complaints about costs would be caught by cl. 18 and so would have to be dealt with under the 2004 Act. But even if that is not how the Costs Court’s decision ought to be interpreted, it would still be the case that costs disputes in matters which began before 1 July 2015 would have to be dealt with under the 2004 Act, while other kinds of complaints arising from such retainers which the Commissioner characterises as consumer matters (professional negligence, failures to give up files on the termination of a retainer, rudeness, trust irregularities) would be dealt with under the LPUL (either automatically in relation to post-1 July 2015 conduct or by virtue of cl. 27 in relation to earlier conduct).

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