Jasmin Solar Pty Ltd v Fitzpatrick Legal Pty Ltd  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.
I gave a presentation at the really well organised Junior Bar Conference this year. The Bar sought questions which the junior barristers who attended wanted answers to. One question, which I thought odd, but which I answered earnestly, was ‘What can a barrister charge for?’ This was my answer:
The starting position is freedom of contract, such that barristers can charge for whatever they can get someone to promise to pay. The costs provisions of the LPUL (the Legal Profession Uniform Law (Victoria)) mostly do not apply in favour of commercial or government clients and commercial and government third party payers. There is newly room, therefore, for much greater creativity in contracting with such clients. Note the application of some provisions about conditional costs agreements and contingency fees, however, even in relation to such clients and such third party payers: s. 170. Continue reading “What can barristers charge for?”
Frontier Law Group Pty Ltd v Barkman  NSWSC 1542 is an ex tempore decision of Justice Slattery in an urgent application to extend the operation of a caveat lodged by solicitors over their client’s property. The application failed in part because the solicitors did not prove, even to the prima facie level required in such an application, that the money said to be owing and secured by the equitable charge which was the subject of the caveat was in respect of fees invoiced under the costs agreement referred to in the caveat. That is not particularly interesting except as schadenfreude.
Two things are interesting though, given that the costs agreement was probably entered into in 2012 and so the Legal Profession Act 2004 (NSW) almost certainly applied (even though the Court looked also at the situation under the Legal Profession Uniform Law (NSW)):
- First, the Court found that the range of estimates of total legal costs was so wide as not to comply with the relevant disclosure obligation.
- Secondly, the Court appears to have treated the extension application as the commencement of proceedings for the recovery of legal costs, such that the statutory preconditions to such proceedings needed to be, but were not, proven to be satisfied by the lawyers.
I cannot think of another authority which states so plainly that some estimates are so imprecise as to render them non-compliant with the obligation to give a range of estimates of total legal costs. But now we have it: a decision of the Supreme Court of NSW under a legislative scheme of which Victoria is also a part and which is likely to be followed as a matter of comity in Victoria.
Barnet Jade has given us an admirably constructed decision of Assessor Olischlager, a no-doubt busy decision maker in the Small Claims Division of the Local Court in NSW. Dupree v Russo  NSWLC 8 was a barrister’s suit for fees against a solicitor. Call me a dag, but it is always a pleasure to find diligent, elegant decisions carefully considering bang-on authority from the busiest decision makers who generally receive little assistance in the researching and writing of decisions. The decision considers whether costs agreements came into existence by the continued giving of instructions, and between whom, what disclosure obligations the barrister had, and whether the limitation period for suing for the fees was re-set by an acknowledgement of debt by the solicitor.
The barrister offered to enter into a costs agreement jointly and severally with his instructing solicitor and their client. The offer said that the continuing provision of instructions would be taken as acceptance. The solicitor continued to give instructions on behalf of the client. The Court found that a costs agreement arose: the instructions were given by the solicitor personally and as agent for his client, as an act of acceptance on both their parts. As the Assessor said: Continue reading “A little case about a barrister suing a solicitor for fees”
This is part 3 of a post about the circumstances in which lawyers can avoid having their fees taxed. Parts 1 and 2 are here and here. In GLS v Goodman Group Pty Ltd  VSC 627, Macaulay J held that an accord and satisfaction which was found to have been made in relation to fees previously rendered for work already done was not a ‘costs agreement’ in the sense of that expression in the now-repealed but still operative Legal Profession Act 2004, so that the prohibitions on contracting out of taxation in costs agreements, and the writing requirements for costs agreements were not applicable. His Honour distinguished Amirbeaggi and Jaha, discussed in the two previous posts, explaining that he was following Beba.
Justice Macaulay ruled: Continue reading “When can lawyers contract out of taxation (part 3)”
Often enough, lawyers would love to avoid having their costs taxed. Under the repealed but still operative Legal Profession Act 2004, lawyers could contract out in advance of the obligation to have their fees reviewed by taxation with ‘sophisticated clients’, but I do not recall ever having seen anyone attempt to do so.
When lawyers have not complied perfectly, vis-a-vis unsophisticated clients, with the costs disclosure regime under the repealed but still relevant Legal Profession Act 2004, they could not recover their fees unless there had been a taxation: s. 3.4.17.
It was clear that unsophisticated clients could not validly agree to waive in advance of the fees being incurred their right to tax their lawyers’ charges. But what about if the solicitors entered into a compromise of a dispute about their already rendered fees with their client?
How did the law of accord and satisfaction apply? (Accord and satisfaction is the litigation estoppel equivalent to res judicata when a dispute is compromised or ‘settled’ rather than adjudicated upon.)
Can lawyers get certainty and avoid further disputation (including taxation) in return for a discount on their fees? Can they get around the s. 3.4.17 prohibition on recovering fees in cases of disclosure defaults unless they have been taxed? If a taxation is commenced and then compromised, I would think there was no doubt that the fees have been ‘taxed’ for the purposes of this rule, especially if the compromise were embodied in orders finalising the taxation. But what if the compromise occurs without any summons for taxation having been issued? Need the compromise comply with the formal requirements for costs agreements on the basis that they are agreements about the payment of legal costs which have been which have been charged for the provision of legal services? Does the accord have to state expressly that the client waives the right to taxation?
It seemed until recently, that lawyers could not preclude taxation by compromising a dispute with a client or associated third party payer about fees, because such agreements would amount to a ‘costs agreement’ under the Legal Profession Act 2004. Costs agreements were defined, after all, to mean ‘an agreement about the payment of legal costs’: s. 3.4.2, where ‘legal costs’ were defined by s. 1.2.1 to mean, amongst other things, ‘amounts that a person has been … charged by … a law practice for the provision of legal services…’). And the Act prohibited unsophisticated clients from contracting out of their right to taxation. Attempts to do so were void: ss. 3.4.26(5), 3.4.31.
The cases in this blog post (Amirbeaggi (NSWSC, 2008) and Jaha (SCV, 2012) explain why unsophisticated clients were apparently equally unable validly to waive their right to taxation after the fees had been incurred as they were unable to do so in advance, by virtue of the breadth of the definition of ‘costs agreement’.
Subsequent blog posts will consider what the Court of Appeal has had to say in a case indirectly on point, and explain the true state of the law in Victoria, as declared by the Supreme Court. It seems now that Victorian lawyers in dispute with their clients can buy their way out of taxation by giving clients a bit of a discount, and that this can occur without any writing or other formalities associated with ‘costs agreements’, and without any express reference to the future unavailability of taxation. The client need not even be aware that they are giving up their right to taxation. And that is so because agreements about how much a lawyer will accept in full and final satisfaction of their claim for fees already rendered for work already done are not ‘costs agreements’ governed by the Act after all. Continue reading “When can lawyers contract out of taxation? (part 1)”
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  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. Continue reading “Transitional arrangements for costs provisions of Legal Profession Uniform Law”
A decision of the Supreme Court of Queensland has made clear what ought to be more obvious than it appears to be, namely that costs disclosure defaults will not result in the setting aside of a costs agreement in the absence of evidence that the non-disclosures had some effect on the client’s decision to enter into the costs agreement on the terms in fact adopted between the solicitor and client. Continue reading “Application to set aside costs agreements for disclosure defaults fails”
Update, 23 September 2013: See also, to similar effect, but in relation to the Federal Court’s Rules: Territory Realty Pty Ltd v Garraway (No 3)  FCA 914. And in Metlife Insurance Ltd v Montclare, 4 September 2013, the Costs Judge, Wood AsJ, found that interlocutory orders made prior to 1 April 2013 may still be taxed forthwith even in the absence of a direction to that effect by the Court making the interlocutory order, despite the introduction of r. 63.20.1 which says that such costs shall not be taxed until after the completion of the proceeding unless the Court otherwise orders.
Original post: The rules in civil proceedings in the Supreme Court of Victoria changed not so long ago. Whereas the usual order in favour of a successful party was that the unsuccessful party pay the successful party’s costs on a party and party basis, but now the usual order is that such costs be paid on a new basis, the ‘standard basis’ the test for which is much the same as the test for the old ‘solicitor and client’ basis against which costs were ordered to be quantified in special circumstances, essentially misconduct during the litigation and not beating offers of compromises.
Sifris J has ruled authoritatively that for work before the commencement of the rule change, costs of a successful party are presumptively to be quantified on the old basis; the new rules in this regard do not have retrospective effect: Jane v Bob Jane Corporation Pty Ltd (No 2)  VSC 467. His Honour’s reasoning is reproduced below. Before I get to it though, may I suggest that solicitors review their costs disclosures to ensure that any adjustments to estimates of costs recoverable from the other side in litigation are brought up to date. More might now be recoverable than before, and certainly it would not hurt to substitute ‘standard basis’ for ‘party party basis’ if that language appears in solicitors’ precedents. Continue reading “Switch from party-party to standard basis not retrospective per SCV”
I had to read Abrahams v Wainwright Ryan  VSC 335;  1 VR 102 from start to finish recently. I noticed the paragraph the subject of this post which, it seems to me, might be useful in arguing in Victoria against a submission in a solicitor-client taxation that an expense should not be allowed because it was unusual and the unusualness not brought to the attention of the client before it was incurred. The paragraph suggests that a failure to warn itself is insufficient to require its disallowance, at least where the lawyer suggests that even had the warning been given the client would have authorised the incurring of the cost. Continue reading “Limit on the unrecoverability of unusual expenses principle in Victoria”
I have posted before about what needs to be pleaded in a modern suit for fees: see this post and the posts linked to within it. Today I have come across a decision in which the failure to plead that which many people think need not be pleaded resulted in a semi-successful application to set aside a default judgment entered by a solicitor against a former client: Wiley v Ross Lawyers (14 February 2012)  QCATA 22, a decision of Queensland’s equivalent of VCAT. The lawyers had not pleaded a valid costs agreement or other basis for charging fees on the basis they were in fact charged, that there had been good service of a valid bill, or that there had been good service of a notice of rights. Apart from these defects in the pleading, the evidence in support of the application to set aside the default judgment was not compelling.
The tribunal ordered that the application to set aside the default judgment was to succeed or fail depending on whether the lawyers filed an affidavit verifying compliance with chapter 3 of Part 3.4 of the Legal Profession Act 2007 (Qld), the part which deals with costs disclosure defaults. I can only imagine that there are very many clients against whom lawyers have entered default judgments who are likely to be able to have them set aside as irregular, even years after the event, though the Queensland tribunal cases might be distinguished on the basis of the need to establish for jurisdictional reasons that what was being sued for was a debt or liquidated demand. The member relied on a previous decision of the same tribunal (Morales v Murray Lyons Solicitors (a firm)  QCATA 87) where the Deputy President, Judge Kingham agreed with the reasons of Member Mandikos, who said: Continue reading “What do you need to plead in a suit for fees?”
Liu v Barakat, unreported, District Court of NSW, Curtis J, 8 November 2011 is the latest in an ongoing scandal in NSW in relation to overcharging by a prominent personal injuries practice which traded as Keddies, but has subsequently been gobbled up by a publicly listed company. Many are unhappy at the strike rate of the NSW Legal Services Commissioner in the whole affair (the sole remaining disciplinary prosecution is two and a half years old and not heading to hearing until April next year), but now the District Court has given judgment in a case finding what appears to amount to fraudulent misrepresentation in relation to the billing of about $69,000 (reduced on a ‘but say’ basis to about $64,000) in a personal injuries case where liability was admitted before Keddies got in the harness, and where the proper charge was about $21,000. Justinian‘s Richard Ackland has the background and latest here.
The partnership apparently bungled the settlement of a taxation allowing the claim to slip through to judgment, and Judge Curtis of the NSW District Court ended up ordering Keddies to repay to the client the difference between what they charged and what they were entitled to charge. The reasons provide food for thought for those out of time to commence taxation because the judge found that the bills had within them implied representations that the amounts billed were properly chargeable at law. He reduced the fees chargeable by Keddies to the amount in fact properly chargeable at law, something which would ordinarily be achieved in a taxation. Such logic might be employed in many cases in the 5 years after a bill during which the client is out of time for taxation but within the 6 year limitation period for prosecuting a misleading and deceptive conduct claim.
The case will be seized on by opponents of hourly billing, and perhaps properly so (the first 6 minutes or part thereof charged for sending a pro forma welcome letter which required only the insertion of the client’s name is an example of why minimum charges of 6 minutes are abhorrent when applied literally, for example). But it really appears to be a case about simple dishonesty (by whom is not made clear), because in the main this was not a case where the clients were billed outrageously albeit according to the terms of a contractual agreement which bound them. I say that because if there was any innocent explanation advanced by the Keddies partners for the conduct the most obvious explanation for which was someone’s dishonesty, it was not recorded in the judgment. This was a case where, in the main, work was charged for which was not done (most likely as in the case of the second 6 minutes or part thereof billed for the welcome letter), or not done by a person whose contractually agreed rate warranted the charge for the time spent. For example:
- A secretary was impermissibly charged at partners’ rates ($460 per hour).
- One hour’s work was charged on 4 October 2005 for drafting the costs agreement which had been signed on 30 September 2005, and an associated explanatory document at senior litigation lawyer rates, when in fact all that was required was the insertion of the client’s name. The Court held that the rate which would have been properly chargeable under the costs agreement had that been the appropriate method of billing was 6 minutes of a secretary’s time at secretaries’ rates. No argument appears to have been advanced that this was not work done for the client, but the lawyers’ own costs of entering into a contract to which they were a party and which they wished to propose the terms of. There is no record of any evidence having been given that the time entry was a mistake, and it is hard to see how the recording of time beyond (at most) one block of 6 minutes or part thereof could have been anything other than outright dishonesty on at least someone’s part within Keddies, even if this activity was properly taken to be work engaged in by the solicitors on the client’s behalf.
- A charge for two blocks of 6 minutes or part thereof was charged at the secretaries’ rate for reading a letter advising the time, date and place of a medical appointment, a further charge of two such blocks for ‘considering’ that letter, and a further charge of two such blocks for advising the plaintiff by letter of that information. The total bill for work which it is hard to see taking 5 minutes of a secretary’s time was $108 (for which incidentally, just to keep this real, you can currently have a linguine with fresh sardines, pine nuts, currants and saffron, a gravlax, three glasses of Italian prosecco, a chocolate pudding with peanut butter ice cream and a strawberry mousse with jelly and meringues at Gill’s Diner).
- The plaintiff was charged $184 (4 blocks of 6 minutes or part thereof at partner rates) for reading, then considering, a letter which said ‘We enclose authority for execution by your client to enable us to obtain documentation from the Department of Immigration and multicultural and indigenous affairs. Please have your client sign the authority and returned to us as soon as possible.’
- The plaintiff was charged $131 (3 blocks of 6 minutes or part thereof at partner rates) for reading an email the non-formal parts of which read ‘Rcv’d’. (What a freaking joke!) She was charged the same amount for reading the email to which that was a reply, the non-formal part of which read ‘I refer to our telephone call this morning. I have been directed by Assessor J Snell, to inform CARS: 1. The CARS hearing date on 14 September 2005 has been vacated — please cancel the interpreter arranged by CARS. The CARS hearing date has been rebooked for 17 November 2006 at 10 am — please rebook a Mandarin interpreter.’
It will be interesting to see the response of the police, the NSW Legal Services Commissioner and the Council of the NSW Law Society to the judgment, especially in light of the fact that the plaintiff’s complaint to the Commissioner was officially withdrawn, a fact which did not of course prevent the Commissioner from continuing to investigate it: s. 512 Legal Profession Act 2004 (NSW). Somewhat surprisingly, I learn from that section, that the withdrawal of the complaint also does not prevent the complainant from re-lodging it: sub-s. (5). Continue reading “The Keddies overcharging civil case no. 1”
’19. The fault is not however entirely that of [the solicitors]. Professional experts have an obligation to behave promptly, frankly and openly when or if they become aware that their estimate of fees and expenses is likely to be materially exceeded. They must inform their principal and provide an opportunity for an informed choice to be made – whether or not to proceed with the engagement or to re-negotiate its terms and extent. It is commercially unacceptable for a professional expert to remain silent, to complete the work and then to present a bill significantly in excess of the original estimate – as if it were a fait accompli. Such conduct is unacceptable whether it is merely forgetful, or just sharp.’
The Legal Services Commissioner’s office and its predecessors have apparently long taken the view that the obligation in s. 86 of the Legal Practice Act, 1996 to provide certain costs disclosures to clients at the time of retainer is imposed on the solicitor with responsibility for the file regardless of whether or not the retainer is with them personally, with a firm of which they are a member, or with a company of which they are a director. The Law Institute had a go at a solicitor on this basis in 1992 and 1999: Victorian Lawyers RPA Ltd v Vernon, unreported T0070 of 2002, 17 May 2002, Registrar Howell and Victorian Lawyers RPA Ltd v GAVS  VLPT 4. Those attempts failed, but not squarely on the basis that the charges were incompetent for having been brought against the wrong person. Now the question has been fully argued and decided contrary to the Commissioner’s position. According to VCAT, the obligation was prima facie imposed exclusively on the retained entity. In the case of incorporated legal practitioners, there were such provisions under the 1996 Act attributing liability to directors, but not non-director employees. Quite amazing really that this point was first squarely decided 15 years into the 1996 Act’s operation. Continue reading “Who can be pinged for costs disclosure defaults under the Legal Practice Act, 1996?”
Update, 16.2.12: See now Ipex ITG Pty Ltd v McGarvie  VSC 675.
Original post: A recent decision of the Supreme Court’s Costs Court means that solicitors have only a non-extendable 60 days in which to seek taxation of counsel’s fees, even though clients and third party payers have an extendable 12 months in which to seek taxation of the solicitors’ fees, including disbursements such as counsel’s fees: Kong v Henty Jepson & Kelly Pty Ltd, unreported, Associate Justice Wood, 4 April 2011. The same result was reached in I.J.R. Homes v MDM Legal Services SCI, unreported, Associate Justice Wood, 12 September 2011, and the Costs Judge’s comments in that order are reproduced at the end of this post too. Unless the barrister may be joined to and bound as against the solicitor to the outcome of the taxation of the solicitors’ fees initiated after the expiry of the time allowed to the solicitor for seeking taxation of the counsel’s fees, the solicitors run the risk of the client being liable to them only for the taxed down amount of counsel’s fees while the solicitors remain liable to the barrister for the full whack.
And the solicitor cannot get around the problem by seeking to procure their client to seek taxation of the counsel’s fees directly against counsel, because, the Supreme Court says, clients have no standing to do so. Though the Court has a discretion under s. 3.4.42 to join ‘concerned law practices’ and order that they be bound by the outcome, it did not make such orders in the Kong Case joining the barrister, though for reasons peculiar to that case, the Court’s reluctance to do so may not be as great in future. All of that applies where the traditional relations between client, solicitor and counsel are entered into; where the client has a costs agreement with the barrister, things are different, and less problematic for solicitors.
But for the fact that solicitors tend to disregard the law of costs and carry on as they always have, no matter what the law is and how it is changed, four reactions might be expected in Victoria and the many other states with analogous statutory provisions:
1. Solicitors will commence prophylactic applications for taxation of counsel’s fees within 60 days after service on them of the fee slip, in case the client later seeks to tax the solicitors’ bills (but they may well have to pay the costs of doing so out of their own pockets);
2. Solicitors will require counsel to contract directly with clients in relation to fees, which many counsel will not be prepared to do;
3. Solicitors might seek to contract out of clients’ rights to review counsel’s fees as disbursements on their bills, or to contract out of their rights to review counsel’s fees as disbursements on their bills, once their right to seek review of counsel’s fees has expired, but that is likely to be effective only where the clients and third party payers are ‘sophisticated’ within the s. 3.4.2 meaning of that term, since agreements about costs which purport to contract out of normal (as opposed to ‘sophisticated’) clients’ and/or third party payers’ rights to taxation are void: see ss. 3.4.26(5) and 3.4.31; or
4. Solicitors might make it a term of their costs agreement with counsel that counsel indemnify the solicitors against any difference between the amount paid by the solicitors to the barrister and the amount payable by the client to the solicitors in respect of those same fees, but any such agreement would have to have a degree of sophistication, to avoid counsel taking the rap for a solicitor’s default (such as where counsel provide adequate information for the solicitor to provide disclosure of counsel’s fees to the client, but the solicitor fails to do so, with the result that the solicitor’s taxed costs, including disbursements such as counsel’s fees, are reduced under s. 3.4.17(4).
How are similar problems treated in other states’ and territories’ taxing and review jurisdictions?
For a long time after the new national profession legislation is introduced, if it is introduced in its present form, many lawyers are likely to find themselves restricted to charging scale, and not being able to recover their costs until there has been a taxation in the Costs Court, even when they have negotiated a costs agreement.
Reproduced below is that part of the proposed national law regulating lawyers that relates to legal costs. The whole draft law may be downloaded here, and it is hoped that this will be the final version to be adopted by Victoria, New South Wales, Queensland and the Northern Territory, home to about 85% of Australia’s lawyers. Truly scary stuff:
- There is an obligation that all legal costs be ‘no more than fair and reasonable in all the circumstances’ and that ‘in particular’, they be ‘(a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount’: s. 4.3.4(1);
- A costs agreement will be only ‘prima facie’ evidence that costs disclosed in it are fair and reasonable in that sense: s. 4.3.4(4); and
- Non-compliance with any of the costs disclosure obligations will render the costs agreement void: s. 4.3.9(1)(a) and the client need not pay them [on scale…] until they have been taxed as between solicitor and own client.
The first point really introduces into the Act fairness and reasonableness requirements as to the amount billed which presently only apply expressly at the moment of taxation, and which are found in r. 63.61 of the Supreme Court Rules, which says ‘(1) On a taxation of the costs payable to a solicitor by the solicitor’s client all costs reasonably incurred and of reasonable amount shall be allowed.’ The present s. 3.4.44 of the Legal Profession Act, 2004 is more limited in its restraint of billing, in the case of negotiated costs agreements. It says ‘(1) In conducting a review of legal costs, the Costs Court must consider- (a) whether or not it was reasonable to carry out the work to which the legal costs relate; and (b) whether or not the work was carried out in a reasonable manner’: nothing about the reasonableness of the amount billed per se.
Since virtually no lawyers I have anything to do with manage to comply to the letter with the existing not dissimilar costs disclosure obligations, it seems very likely that there will be a lot of retainers in which the client will be able to establish the voidness of the costs agreements. Lawyers will then be left to seek recovery of their costs on scale, but may not have recorded the information necessary to prepare a scale bill in taxable form which will do justice to the work they have done. Fun times ahead for costs lawyers!
Compare the situation presently in Victoria where non-compliance with the costs disclosure obligations only [I never thought I would say ‘only’] means that the client need not pay the fees until they have been taxed as between solicitor and own client, and on that taxation, the solicitor is presumptively liable to pay its costs, and the taxed costs are to be discounted by a proportion that reflects the seriousness of the non-disclosure. Presently, the costs agreement will be disregarded only when it is set aside by VCAT (a jurisdiction which looks to fall away), or where by virtue of a material non-disclosure, it is disregarded pursuant to s. 3.4.44A of the Legal Profession Act, 2004, which has rarely happened. Continue reading “Client joy to abound in draft national profession legislation’s costs provisions”
I’m giving a seminar on Wednesday: see http://bit.ly/npDJVY. I’m talking about Misconduct and Costs. The Supreme Court of Victoria’s Costs Judge, Associate Justice Jamie Wood, is talking about best practice in taxations of costs, and Liz Harris, the founder of Harris Costs Lawyers, is talking about costs agreements and risk management. I think it’s going to be a really good seminar. Now, I have an offer and a request. I have two free tickets to give away. If you would like one, let me know.
As to the request: foolishly, I have promised to tell those attending the answers to the following questions:
- Is it charging by the hour that stinks or the abuse of charging by the hour?
- Will fixed fees be any less problematic?
- For what activities is it permissible to charge time-based fees?
- Can you charge two clients for one piece of work?
- When does overcharging become gross overcharging?
There is no clear answer to the third question, except perhaps in the heads of taxing officers, and little commentary that I can find. If you have any experiences of what is allowed and disallowed in taxations between solicitor and own client (as opposed to taxations between parties on a solicitor-client basis) which are conducted by reference to a costs agreement specifying charges at an hourly rate, I would be interested to hear them.
Similarly any experiences of costs disputes involving fixed fees.
Martinez v Morris  FMCA 478 will be enjoyed by those who take pleasure in the suffering of lawyers. A well known national law firm with over 500 staff acted for a man. They had a low opinion of him, and so required that his wife promise to pay his fees. Since her promise was made directly to the law firm, she was an ‘associated third party payer’ to whom disclosure obligations in relation to costs estimates and the manner of charging and so on were owed. The obligations were not satisfied though. Sure enough, the husband did not pay the firm’s fees. So they sued his wife. She did not defend, ignorant of s. 317(1) of the Legal Profession Act, 2004 (NSW) which said that by virtue of the disclosure defaults, she need not pay the fees until there had been what used to be known as a solicitor-client taxation at the solicitors’ expense. Default judgment was obtained and no attempt was made to set it aside. And then the firm set out to bankrupt her. A creditor’s petition resulted in a sequestration order. It was the end of the road; they’d got their pound of flesh and could move a trustee in bankruptcy in to scoop up her worldly possessions, and take away any income she might earn, to restore the hole in their profits.
Then some bright spark alerted the wife to the solicitors’ problem. ‘Too late!’ you might say to yourself diving for a statement of res judicata, if you have not been reading my blog properly (see this post and this one about Quaresmini v Crouch & Lindon (a firm)  FMCA 750 and Chadwick Lawyers v McMullen  FMCA 992, both Queensland cases to which no reference was made in the NSW case at hand). But no, not too late: Federal Magistrate Driver set aside the sequestration order — that is he unbankrupted the wife — and completely sicked the solicitors on costs for good measure. In the process, he looked beyond the default judgment, rendering it worthless for the purposes of bankrupting the wife without it having been set aside. And now, no doubt, the wife has a right to set aside the default judgment ex debito justitiae (as of right), so the firm cannot substitute the Sheriff for the trustee in bankruptcy. The wife may still have to pay her husband’s legal fees; whether she does or not will depend on whether the firm can be bothered having the NSW equivalent of a taxation at which the taxed bills may be reduced on account of the wholesale costs disclosure defaults. Whatever the case, she won’t have to pay them for some time, and there must be a real issue about whether the lawyers are entitled to interest since the bills were originally given.
The costs order was that the law firm pay the costs of the creditors’ petition in which they were successful as well as in the application to set aside the sequestration order in which they were unsuccessful. His Honour reasoned as follows at  to :
In AMI Australia Holdings Pty Ltd v PHD Networks Pty Ltd  NSWSC 161, the NSW Supreme Court’s Associate Justice Macready noted another decision, which illustrates the potential for costs disclosure defaults to be raised as a foundation for a genuine dispute such as to warrant the setting aside of a creditors’ statutory demand for unpaid legal fees. The decision of Santow J in Callite Pty Ltd v Adams  NSWSC 52 was described as follows:
‘There, a solicitor served a statutory demand demanding payment of an amount of unpaid legal costs. One of the grounds of challenge to the demand was that the solicitor had failed to make the disclosure required by section 175 of the Legal Profession Act 1987 (NSW). Santow J (as his Honour then was) held that this ground of challenge was not available because no facts were deposed to from which one could infer that there was no fee disclosure and the costs agreement. However, the affidavit did deposed to the receipt of accounts and those accounts were annexed. Santow J held (at ) that a perusal of the accounts showed that they lacked the prescribed statutory content as required by section 192 of the Legal Profession Act and a regulation 22A of the Legal Profession Regulations 1994 (NSW). Section 192 of the Act precluded any action being taken for recovery of costs until 30 days had passed after the provision of a bill of costs which complied with the Act. Santow J held (at ) that the legal consequences which flowed from the form in which the accounts were rendered were not required to be pleaded in the affidavit. His Honour set aside the statutory demand on the basis that public policy precluded a statutory demand being used to bypass the safeguards of the Legal Profession Act.’
This is part 4 of a serialisation of a paper I gave on about costs disclosure obligations and the consequences of not complying. Parts 1, 2, and 3 are here, here, and here. This post begins to answer the question ‘What must be disclosed’. The balance of the answers to that question is to be found in instalments yet to come. Continue reading “Costs disclosure obligations and consequences of not complying: part 4”