VCAT has published reasons, the first I’ve come across, dealing with the allowance of costs under a costs agreement void for disclosure defaults: Sleath v RGL  VCAT 1998. Though they do not say so, it seems that the principal logic of the determination, under the same principles as the Costs Court is required to have regard to in taxations, was to keep the practitioners to their original written estimate notwithstanding subsequent oral updates. Scary stuff for lawyers if other decision makers reason similarly. Whether the Costs Court will reason similarly is an interesting question. It may be more likely that the Legal Services Commissioner will feel compelled to adopt similar reasoning in those costs disputes which it determines itself rather than referring off to VCAT. Good news for clients and third party payers if so. Continue reading “Holy moly! VCAT finds costs agreement void for ambiguous disclosure then orders solicitors to content themselves with original estimate”
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?”
The Victorian Legal Services Commissioner has published a report on his new proactive regulation of the profession. It tells how risk profiles of practices are being constructed with the assistance of academics to target trust audits and audits of firms more generally (a new thing for law practices which are not ILPs). It also tells about the exercise of the power to make binding decisions, and alerted me to the fact that the Commissioner now publishes redacted versions of costs determinations at this page. The report says: Continue reading “Legal Services Commissioner’s new decision making powers”
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)”
I’m chairing what should be a great seminar for litigators at Melbourne’s RACV Club on 28 August 2013. Judicial Registrar Meg Gourlay who is one of the two decision makers who is handling most of the solicitor-client taxations in the State at the moment is the lead singer, talking about the changes to Order 63 of the Supreme Court Rules and the new Supreme Court scale which is no doubt the harbinger of new scales in other courts too. Despite my complete failure as a blogger to bring them to your attention, these are big changes: so big I have never quite got around to writing a post about them, a bit like the post about the decision in Fritsch v Goddard Elliott. So it is well worth finding out what the Costs Court figures they mean. Apart from anything else the more mysterious bits have been chopped out of the scale which means that lay lawyers uninitiated in the dark arts of that most mysterious of cabals — the costs lawyers — might actually be able to draw bills themselves with a bit of orthodox education, a spot of which the Judicial Registrar is going to engage in.
The band is pretty hot too. Anna Sango has bravely taken on the task of speaking about a strange new concept getting a workout at the salons of the most elegant cost lawyers: ‘proportionality’, absolutely all the rage I’m told amongst aristocrats in England whose favourite pastime seems to be inventing more rules for that greatest of all English board games, litigation. Frankly, it seems like a dangerously French concept to me, a sly limit on the individual’s right to litigate matters of principle and bugger the expense, but Sango will no doubt tell us that it’s more nuanced than that. Then, after all that esoterica, Paul Linsdell, one of the head honchos of the behemothic Blackstone Legal Costing will speak on tips and traps when arguing costs in litigation. The traps are newly refreshed thanks to the subject matter of Judicial Registrar Gourlay’s talk, and so this hoary old chestnut of a topic will be worth a listen. And then Debra Paver, who has given evidence in a few security for costs applications in her time, will speak on the inherently useful subject of how to argue for and against such applications.
I have two otherwise unbelievably expensive tickets available for enticing supplicants.
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.
First of all, happy new year!
The take-home point of this post is that if you lodge a civil complaint (e.g. a pecuniary loss dispute or a costs dispute) with the Legal Services Commissioner, you limit the amount of compensation you can get in VCAT to $25,000 because of s. 4.3.2(1)(c) of the Legal Profession Act, 2004. That prevents the commencement of proceedings in relation to the subject matter of the complaint until the complaint has been finally determined, or dismissed, by which time it will often be res judicata, at least in those cases where the final determination is by VCAT or the Supreme Court or the Court of Appeal (subject, perhaps, to (i) the operation of s. 4.2.14(2), which is what the Court of Appeal calls the ‘two bites of the cherry’ provision, and (ii) the possibility of adding a Fair Trading Act, 1999 cause of action to a proceeding originally instituted in VCAT under the Legal Profession Act, 2004, discussed below). In this touchy feely win win alternative dispute resolution Civil Procedure Act, 2010 world, it is apparently anomalous that those who choose to travel to VCAT’s Legal Practice List via the obvious alternative dispute resolution channel (i.e. via a civil complaint to the Commissioner’s dispute resolution jurisdiction) are penalised so severely in comparison with those who proceed immediately to litigation in that List by invoking the parallel jurisdiction of the Fair Trading Act, 1999. Continue reading “Lodging a civil complaint with the Legal Services Commissioner limits you to compensation of $25,000 per complaint”
Here begins a series of posts on costs disclosure obligations under the Legal Profession Act, 2004, and the consequences of not complying with them. It is a work in process, and I would be grateful for any experiences of this area of the law you might have, and any authorities of interest which I have not included.
* * *
We have had costs disclosure obligations mandated by legislation for a long time now. The Legal Practice Act, 1996 came into operation on 1 January 1997, and applied to matters in which the solicitor was retained after that date, and to costs agreements made after that date: cl 18, Schedule 2. There is a similar regime under the Legal Profession Act, 2004, which came into force on 12 December 2005 but, as we will see, the differences are kickers. The Legal Profession Regulations, 2005 contain provisions relevant to about the costs disclosure and bill disclosure regimes alike. Continue reading “Costs disclosure obligations and consequences of not complying: part 1”
In Michaels v Daley  VCAT 1205, Senior Member Howell advised that:
’12 It usually is an implied term of the engagement of a legal practitioner, at hourly rates, that the work will be performed efficiently. It is an implied term of the kind that “goes without saying”, to adopt the phrase used by the Privy Council in B.P. Refinery (Westernport) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20 @ 26. It goes without saying that a client does not agree to a practitioner acting inefficiently, by spending an excessive amount of time performing legal work, only to be rewarded for every hour of inefficiency.’
Who knew? Breach of the implied duty no doubt carries an entitlement to damages, and every suit for fees can be turned into a taxation, so long as ‘efficiently’ means the same as the concept of ‘necessary or proper’ in the law of taxation.
In the 2007-08 financial year, the Legal Services Commissioner (aka the Bureau de Spank on this blog) received 2033 complaints (801 civil complaints, and 1584 disciplinary complaints). That’s one for every 7 of the 13,837 lawyers who worked in Victoria as at the end of March 2008. 17% of them were characterised as mixed civil and disciplinary complaints. One in 12 complaints was referred to the Law Institute for investigation. Comparatively few prosecutions were brought. In fact in only 1 in 25 complaints was the trigger for a prosecution arrived at, and a small fraction of those were or will be prosecuted. Only 32 reprimands or cautions were issued by the Commissioner. I take all this from the latest annual reports of the Commissioner (see my posts on the two previous annual reports here and here) and the Legal Service Board. It makes me realise that mine is a skewed perspective, and that solicitors hire barristers to represent them in the complaints which are more complicated, more serious, or more anxiety-provoking. Accordingly, much of what follows must be taken as advice in relation to the more serious end of the complaints spectrum.
Most of my clients want to avoid, above everything else, prosecution in VCAT. Fair enough too. All other outcomes remain hidden from public scrutiny. Successfully defending a prosecution is a hollow victory: the allegations against you still get published in the reasons on Austlii, and the prospect of a costs order in your favour is virtually nil: Clause 46D, Schedule 1, Victorian Civil & Administrative Tribunal Act 1998. It is the lawyers who do not do a good job of responding to the complaint who get prosecuted, rather than those who do the worst things. There is of course a limit to that proposition: do something bad enough (especially in relation to trust accounts) and you will be prosecuted, assuming that the Commissioner thinks she can prove it, regardless of how cooperative you are in the investigation. The Commissioner has recently published guidelines in relation to her prosecutorial discretion: here and here. Some of the factors she considers are:
- whether the practitioner acknowledges his or her error and/or has shown remorse;
- whether the practitioner made a mistake and is unlikely to repeat the conduct;
- whether the practitioner cooperated during the investigation;
- whether a guilty finding may entitle the complainant or others who may have been adversely affected to compensation.
Not doing a good job during the investigation phase manifests in two ways:
- failing to take legitimate and forensically useful technical points; and
- (where there are none) failing to realise that demonstrating a current understanding of the relevant law, admitting the error, expressing contrition, and taking the rap is always a better policy than being uncooperative.
In the latest Byrne v Marles ( VSC 210), Justice Beach seems to have found that any particular allegation made by a complainant may properly be characterised as both a civil and a disciplinary complaint. If the Legal Services Commissioner receives a complaint, she must investigate it to the extent it is a disciplinary complaint and must try to settle it to the extent it is a civil complaint. There is no particular difficulty where two allegations are found in one complaint document, and one is characterised as a civil complaint and another is characterised as a disciplinary complaint. In my experience, that is what the Commissioner always does: she chooses between the two alternatives in relation to any one allegation as if they are mutually exclusive.
Since ‘any genuine dispute’ between the complainant and the lawyer complained about is a civil complaint, however, one might think that all disciplinary complaints in which the complainant has a dispute with the lawyer complained about will amount to both a civil and a disciplinary complaint. And since an allegation will be a disciplinary complaint if it is of conduct which ‘falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent’ lawyer, there will be many civil complaints which will also be disciplinary complaints.
In such a circumstance, unless the Commissioner summarily dismisses the whole complaint under s. 4.2.10, she must try to settle it (insofar as it is a civil complaint), and (insofar as it is a disciplinary complaint) she must investigate it.
If Justice Beach’s logic is applied, profound challenges await the Commissioner. They are inherent in the Act’s injunction in relation to one dispute to investigate it in the public interest with a view to prosecuting and penalising the lawyer, while at the same time trying to resolve the dispute between the complainant and the lawyer. Most obviously, what is the Commissioner to do about s. 4.3.5(4)? It says:
‘Evidence of anything said or done in the course of attempting to resolve a civil dispute is not admissible in proceedings before [VCAT] or any other proceedings relating to the subject-matter of the dispute.’
Are there to be two sets of responses, in one of which (in the civil complaint) the lawyer makes socially appropriate concessions, apologises, and agrees to pay money in return for confidentiality, and in the other of which (the disciplinary complaint), the lawyer takes all appropriate technical points and, while being fully frank and open as required by the Act, concedes nothing? And imagine the disquiet the lawyer’s insurer will have knowing that the Commissioner will be able to compel the provision of answers from a practitioner, as if interrogating him, in the disciplinary complaint which will run parallel with the professional negligence claim constituting the civil complaint. Continue reading “Distinguishing between civil and disciplinary complaints”
Mr Burmingham is the subject of three posts already. They dealt with three discrete aspects of his case, Maurice B Pty Ltd v Burmingham  VSC 20: a titillating detail, advocates’ immunity, and the nature of the suit for fees. But his case was really mostly about what happens when a no-win no-fee costs agreement is terminated before the end of the case. Of course, it all depends on what the costs agreement says, and this costs agreement was presumably the result of many years’ honing by one of Australia’s foremost plaintiff firms. Justice Byrne was not complimentary of the draftsmen (nor of the court book’s reverse chronological order, a bugbear of my own). But in the end, the lawyers got their fees even though they did not obtain a successful result for Mr Burmingham. Continue reading “Termination of a no-win no-fee retainer”
Imagine this. A beneficiary thinks a trustee is diminshing the trust estate by spending too much on lawyers. They have no standing to seek a taxation of the trustee’s solicitor’s bill, and the trustee’s solicitor’s file is unavailable to them by virtue of legal professional privilege enjoyed by the trustee. The beneficiary has no contractual or equitable relationship with the solicitor. You might think they’re rooted. But you would be wrong, for the beneficiary may apply to VCAT’s Legal Practice List for an order that the solicitor pay to the disgruntled beneficiary that beneficiary’s share of so much of the fees properly and reasonably charged by the solicitor on instructions as represents the difference between what a reasonable trustee would have spent and what the trustee, perhaps over-anxious by disposition, in fact spent. So says VCAT’s Legal Practice List’s decision in Sinni v DO  VCAT 135. I should disclose that I appeared in a directions hearing in this matter. Continue reading “The disgruntled beneficiary and the executor’s lawyer”
In a long-wnded way, I tentatively suggest that, so long as the applicant has the sense to invoke s. 108 of the Fair Trading Act, 1999, then penalty interest is available under the Supreme Court Act, 1986, just like in the Supreme Court, so long as the dispute is a consumer-trader dispute. That is, a dispute between a purchaser or potential purchaser and a supplier or potential supplier of goods and services, broadly defined. There are some causes of action which come with specific interest provisions too, like the one attached to costs disputes under the Legal Profession Act, 2004.
In Nicholson v B&S  VLPT 28, the Legal Profession Tribunal’s Registrar Howell, considered three questions about the burden of proof:
- Where there is a dispute about the amount of legal costs, must the client prove that the costs were too great, or must the lawyer prove that the costs were just right?
- Where there is an application to set aside a costs agreement, must the client prove that there was a costs agreement as a starting point in the case, or must the lawyer?
- If a client alleges, as a reason why a costs agreement should be set aside pursuant to s. 103 of the Legal Practice Act, 1996, that the lawyer engaged in misconduct or unsatisfactory conduct, does she have to prove the allegation according to the Briginshaw standard of proof or is it sufficient to prove it on the balance of probabilites as more ordinarily understood?
The second one is obvious, an issue thrown up only by an out of left field submission by an unrepresented litigant. The answer is that the client must prove the existence of a costs agreement before an order may be made at her application for it to be set aside. The answer to the third is simple: the Briginshaw standard described in Briginshaw v Briginshaw  HCA 34; (1938) 60 CLR 336 @ 362, which says, in its application to disciplinary proceedings —
The civil burden of proof — on the balance of probabilities — means different things in different cases. If you want to make out a case of serious wrongdoing, like misconduct, you’d better do a good job of convincing the Court.
The first is a little less obvious. Here is Registrar Howell’s take on the issue: Continue reading “Onus of proof in costs disputes between lawyers and clients”
I was drinking beer at The Peacock the other afternoon, and a VCAT member was muttering about the Supreme Court overturning VCAT decisions on the basis that applications for adjournment were not granted when they could have been cured by an order for costs. The suggestion was that the Court may have overlooked the fact that no costs are awardable in certain classes of cases. The other point was that in many lists, like the civil list, members are expected to churn through a case an hour, without the assistance of counsel on which decision makers generally rely on so heavily.
My conversation came back to me while reading HL v Fahey  VCAT 2400, a case about Ms Fahey’s dissatisfaction with a bill for $1,199. Ms Fahey successfully sought 2 adjournments. The first time, she had to go to Norway for a qualifying competition for the Olympics. Her game is dressage. The second time, she simply wrote in sick. The third time, she attached a sick note from a doctor. VCAT told her that administrative adjournments were over and told her to come to the hearing and make her application there, and to be ready to proceed if she failed. She did not turn up, and so an order was made against her. She sought a review, akin to an application to set aside a default judgment. She sent a fax to VCAT at 9.36 a.m. before the 10 a.m. hearing in which she said she was ‘unable to attend today’s review hearing due to extreme illness’, and concluded ‘I will contact you again in the future to arrange a new review date.’ That attempt to direct the Tribunal to adjourn failed, and Senior Member Howell heard the case in her absence, saying: Continue reading “VCAT runs out of patience with serial adjourner”
In the Victorian Legal Services Commissioner’s 2006-2007 annual report, she makes the following points about withdrawing complaints under the Legal Profession Act, 2004:
- civil complaints and disciplinary complaints alike may be withdrawn;
- if a civil complaint which is characterised as a costs dispute is withdrawn, any costs paid into trust at the outset must be paid to the lawyer;
- if a disciplinary complaint is withdrawn, the Commissioner may nonetheless continue to investigate the conduct of the lawyer.
The law of unconscionable conduct has been rolled out again as a vehicle to adjust lawyers’ fees in the same way as they might be in a civil costs dispute under the Legal Profession Act, 2004, but in a case to which that Act’s regime did not apply. It has happened once before to my knowledge (see my previous post). In P&R v. Goodwin  VCAT 1199, solicitors sued for their fees, but succeeded in obtaining an order only for the difference between the amount they estimated total legal fees to be at the start of the retainer, and the amount they had already been paid by the client. I do not think VCAT has jurisdiction in relation to disputes between lawyers and clients, because the jurisdiction is predicated on the engaging in of trade or commerce (VCAT has reserved on a test case in that regard). That aside, it is a relatively attractive forum in which to sue for fees. This decision may suggest that it is better to sue in a court, however, unless there is an unusual squeaky cleanliness in following the costs disclosure regime. Continue reading “Unconscionability and legal fee estimates, again”
Victoria Marles’s office has produced two new brochures, available from Information Victoria:
‘Are you making a complaint about legal costs? The LSC is required to make reasonable efforts to resolve costs disputes between legal practitioners and their clients. The brochure includes information on the maximum amount of costs which may be considered ($25,000); time limits for making a complaint and the process for making complaints.
Mediation service explained outlines how mediation can be used to resolve civil complaints.
Brochures and further information are available from the LSC at Level 9, 330 Collins Street, Melbourne 3000, phone 1300 796 344 (local call) or (03) 9679 8001 or visit www.lsc.vic.gov.au.’