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”
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 Under the repealed but still operative Legal Profession Act 2004, lawyers could contract out in advance of the obligation to have their fees reviewed by taxation with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When lawyers have not complied perfectly, vis-a-vis unsophisticated clients, with the costs disclosure regime under the repealed but still relevant Legal Profession Act 2004, they could not recover their fees unless there had been a taxation: s. 3.4.17.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)”
BGM v Australian Lawyers Group Pty Ltd  WASC 290 (S) is a decision confined to questions about what ought to follow from a Court coming to a view that a costs agreement ought to be set aside. Three matters are of interest:
1. The Court took the view that it followed as a matter of statutory construction that upon a costs agreement being set aside, bills rendered pursuant to it were of no force and effect, and declined to make a declaration to that effect because it was unnecessary.
2. Though the Court assumed that some form of restitutionary relief would entitle the applicant to repayment of monies paid under such bills, the Court declined to make any such order because no such relief had been pleaded in the originating process.
3. The Court declined an application for costs by the successful applicant for the setting aside of the costs agreement. It did so on the basis that there was a Calderbank offer to accept a sum of money in satisfaction of the lawyers’ claim to fees. The applicant argued that it had succeeded in the application to set aside the costs agreement and that the Calderbank offer should be brought to bear in the subsequent phase of ascertaining the fees against a scale which applied in default of the costs agreement having application. But the Court reserved the question of the costs of the application to set aside the costs agreement pending the finalisation of that second phase.
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”
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”
Quaresmini v Crouch & Lindon (a firm)  FMCA 750 is a salutary tale. The lawyers did some work back in 2007. They sued the client for their unpaid fees and in 2009 got a default judgment having applied successfully for substituted service. Then in 2010, they bankrupted the client. 3 weeks out of time, without any adequate explanation for his delay, the client applied for a review of the decision to bankrupt him, saying that he wanted to apply to set aside the default judgment of which (along with the suit for fees) he had been unaware.
Because the pre-requisites to a suit for fees were not pleaded by the lawyers in the suit for fees, and because they put on no evidence in response to the application for an extension of time that those prerequisites had been satisfied, the Federal Magistrate considered that the client had a sufficiently arguable defence to set aside the bankruptcy to enable him to apply to set aside the judgment. The prerequisites not pleaded or deposed to included the obligation to provide a written notice together with a bill outlining the methods and time limits for challenging it, and identification of the basis (whether in the bill or in the statement of claim) of the claim for the fees — costs agreement, scale or a fair and reasonable charge. It may well be that the solicitors are back to square one, the provision of a lump sum bill which complied with the Legal Profession Act, 2007 (Qld). There are similar provisions in Victoria. The Federal Magistrate said: Continue reading “Here’s why you should comply with the costs disclosure regime”
Virgtel Ltd v Gadens Lawyers  VCAT 1584 might be VCAT’s Legal Practice List’s highest value case. Not all that long ago in the scheme of things, I remember learning that VCAT had certain jurisdictions which were unlimited, and realising that — shock! — it might hear cases which the Magistrates’ Court could not hear. Well, this case is an application pursuant to s. 103 of the Legal Practice Act, 1996 to set aside a costs agreement pursuant to which bills totalling $2.3 million were charged. That explains why two QCs faced off on a pre-trial application.
The respondents applied for summary dismissal under s. 75 of the VCAT Act, but advised the day before the hearing that they would withdraw it. The applicants sought costs of the application. Senior Member Howell granted that application, on a solicitor-client basis. That was because the application was misconceived. Its thesis was that there was no point making an order setting aside the costs agreement because all but one of the bills was out of time for taxation anyway. But it did not follow from the unavailability of taxation that the fees billed by the respondents could not be adjusted. As Senior Member Howell said: Continue reading “Is this the Legal Practice List’s biggest case?”
The plaintiff in Brott v Shtrambrandt  VSC 467 is not having much luck. First of all, he cut what he thought was a plea bargain in a professional misconduct prosecution only to have VCAT’s Legal Practice List increase by 50% the penalty he and the Law Insitute had agreed jointly to contend was appropriate, so that his practising certificate was cancelled and he was prohibited from applying for a new one for 9 months: Law Institute of Victoria v Brott  VCAT 1998. But the extra penalty all became a bit academic when he was prohibited from applying for a new practising certificate until 2014 in a professional misconduct prosecution he contested and lost disastrously (Legal Services Commissioner v Brott  VCAT 2399, and then lost on appeal ( VSCA 55), paying the Commissioner’s costs all the way and suffering withering criticism. Then, in a suit by the solicitor for fees charged back in the day when he was allowed to charge them, Justice Beach has inconveniently declared that what sounded like a pretty kick-arse charge fell foul of the Consumer Credit Code and was void. Section 40 of the Code voids any mortgages (including equitable charges) governed by the Code which do not describe or identify the charged property. ‘[A]ll estates or interests in real estate which I now have or may hereafter acquire’ did not cut the mustard as a description.
Not all costs agreements will be credit contracts governed by the Code. I bet there are a lot of solicitors out there with void equitable charges, however. They will need to proceed with great care in fixing the problem. Unless they procure the amelioration of the position with retrospective effect with the utmost probity, the ‘fix’ may in fact be challenged in the various jurisdictions which give expression to the law’s tenderness towards clients in their dealings with solicitors. It would be sensible to obtain advice if the amount secured by the questionable charge is of sufficient significance to them. Continue reading “Solicitor’s equitable charge to secure fees declared void”
Weiss v Barker Gosling (1993) 16 Fam LR 728;  FamCA 58 is a decision of Fogarty J about an application to set aside a costs agreement and have the client’s debt to his solicitor for representing him in the Family Court quantified by a taxation on the Family Court Scale. It really comes in two parts, the second being reported as Weiss v Barker Gosling (No. 2) (1993) 17 Fam LR 626. The client argued there had been a failure to follow the costs disclosure requirements in the Family Law Rules, that the costs agreement was ‘unreasonable’, that it was void for uncertainty, and that undue influence by the solicitor caused the agreement. The application was made under a provision in the Family Law Rules (r. 8A) which permitted a client to apply for a determination of any question as to the validity of a costs agreement. Upon such an application, the Family Court might ‘confirm, vary or set aside the costs agreement and make any other order the judge considers necessary or appropriate.’ Continue reading “Weiss v Barker Gosling”
It costs about $290 to file an application to set aside a costs agreement under s. 3.4.32 of the Legal Profession Act, 2004 in VCAT. It is not a step lightly to be taken. Moreso than much of what goes on in VCAT, such applications are treated like litigation in a court. Costs will be awarded against the unsuccessful party much more often than in other kinds of proceedings in VCAT; indeed, it is more or less true that costs follow the event, that is, the loser generally has to pay the winner’s costs calculated according to an appropriate County Court scale. See the page on VCAT’s website about these kinds of applications, which includes the correct form for initiating these kinds of proceedings.
Following filing, VCAT generally sets down a directions hearing of its own motion. There is a standard form of orders which is often made. They are reproduced below. To avoid a directions hearing, applicants would be well-advised to include the details (‘particulars’ in legal lingo) the usual orders require in the application itself. The applicant should then ask the respondent whether it will consent to doing what the usual orders generally require within, say, 2 weeks. Alternatively, if that was not done at the outset, the parties might consider submitting the orders they would each be happy with (‘a minute of consent orders’ in legal lingo) in the terms of the usual orders to VCAT in advance, saving the need for a trip to VCAT if the decision maker who would otherwise preside at the directions hearing is content to make the orders on the papers. Of course, a directions hearing may be necessary anyway. Directions made at directions hearings are not necessarily limited to those found in the usual orders. Nor are the usual orders always made.
The usual orders are:
This post has been sitting around as a draft waiting to be finished. There is little chance of that for a long time. So here is my incomplete annotation to s. 103 of the Legal Practice Act, 1996. That is the provision which gives VCAT (formerly the Legal Profession Tribunal) jurisdiction to set aside costs agreements on a statutory basis peculiar to that species of contracts. All costs agreements in all matters in which first instructions were taken prior to 12 December 2005, regardless of when the costs agreements were entered into, may be argued to be governed by the old Act. So there is some life left in the old s. 103 yet. Continue reading “Applications to set aside costs agreements”
Nicholson v B&S  VLPT 28 was the first decision to deal in detail with the principles which govern the extremely wide discretions granted by s. 103 of the old Legal Practice Act, 1996. Registrar Howell cancelled a costs agreement, and ordered that one of the bills the client challenged — the only one she had really jumped up and down about — be taxed by the Taxing Master of the Supreme Court. Mr Howell did so in the following circumstances: Continue reading “Nicholson v B&S — the first important Victorian decision about setting aside costs agreements”
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”
The other day, I did a very geeky thing which was also a bit unonline. I had a coffee with fellow lawyer blogger, the mysterious Legal Eagle. One result of the coffee was that somehow I charmed her into writing a second case note of interest to readers of this blog — this time on the long and not entirely straightforward decision of the Victorian Court of Appeal in Equuscorp v Wilmoth Field Warne, referred to briefly in my post ‘Cases, cases’. Go read it. A second may have been that Ms Eagle has ‘tagged’ me with a ‘meme’. It’s very blogosphere. I will participate, but one of the three limbs of this modern day chain letter is going to die with me as I don’t intend to tag anyone else. I will be very grateful if some of the effusive commenters over at her blog migrate over to mine and get a bit of discussion going. So, 3 reasons why I blog. Continue reading “On blogging”
Update, 19 February 2008: Fellow Melbourne law blogger Legal Eagle has kindly written a case note on Equuscorp v Wilmoth Field Warne.
Update, 21 December 2007: Another two advocates’ immunity cases:
1. Symonds v Vass  NSWSC 1274, 36,000 words, after nearly 3 weeks of trial. See Ysaiah Ross’s case note in his article in The Australian on 30 November 2007 titled ‘Let’s Dump Advocates’ Immunity’.
2. Mallik v McGeown  NSWSC 1414.
Update, 19 December 2007: Fellow Melbourne law blogger Legal Eagle has done an excellent case note on the first case referred to below, saving me the trouble.
Original post: The Supreme Court and Court of Appeal is dropping cases on this blog like no tomorrow. I can’t keep up, so I will just bring them to your attention for the time being:
1. Re Legal Practice Act 2004; re OG, a lawyer  VSC 520, in which the Court of Appeal today struck off the roll a barrister whose disclosure to the Board of Examiners about an allegation at university that he cheated on an assignment was found to be a lie. Legal Eagle provided a long note of the case here. In other news, a famous American judge, Richard Posner, wrote a book on plagiarism. He blogs too. Update: 29 January 2008: And compare this American case (In the Matter of Willie Jay White, Supreme Court of Georgia) about an applicant for admission to practice which was denied because his explanation for curious similarities between his work and another’s at law school was not believed.
2. Equuscorp Pty Ltd v Wilmoth Field Warne (a firm)  VSCA 280, a case about whether estoppel by convention could operate against the prima facie disentitlement in a solicitor to recover fees under a void costs agreement, and about where exactly the dividing line is between a void and a good costs agreement. It is the latest in a long saga.
3. Coadys (a firm) v Getzler  VSCA 281, a case covering much the same territory as the Equuscorp Case. This case and the previous one will be very important for the interpretation of the Legal Profession Act, 2004‘s costs provisions.
4. Francis v Bunnett  VSC 527, in which Justice Lasry dismissed an application for summary judgment by reference to advocates’ immunity in a classic regretted settlement case. That is, his Honour was not persuaded of the hopelessness of the client’s argument that where there has been no adjudication after a trial, there is no finality of the kind protected by the immunity which is worthy of protection. It is notable that a number of cases which have gone the other way are not mentioned in the judgment.
5. MM&R Pty Ltd v Grills  VSC 528, a decision of Justice Cavenough yesterday about the availability of advocates’ immunity as a defence to a suit alleging simple delay, and where there has been no adjudicated decision of a court worthy of protection. His Honour recognised that the immunity applied in such circumstances.
It will be interesting to read the two advocates’ immunity decisions more carefully, and tease out to what extent they are consistent with one another.
Acting President Bowman handed down a decision on Friday in Cedric Naylor’s Case  VCAT 958 approving the existing practice of VCAT, and before it the Legal Profession Tribunal, of entertaining professional misconduct allegations against lawyers by their clients as part of applications to set aside costs agreements. Entertaining them, that is, outside the disciplinary investigation and prosecution procedures in Part 5 of the old Legal Practice Act, 1996, and regardless of whether those who otherwise prosecute disciplinary charges would have brought a charge. Under the old Act, a costs agreement could be set aside upon proof by the client of (i) dishonesty in the solicitor, or (ii) misconduct or unprofessional conduct in the retainer, or (iii) a want of fairness and reasonableness of the agreement. Judge Bowman ruled that it was not necessary for the solicitor to be found guilty of misconduct or unsatisfactory conduct in the ordinary way, by a prosecution by a legal regulator under the disciplinary provisionso of the Act before the client could rely on the second ground, but he did say that if misconduct is made out in an old Act case, then no disciplinary consequences such as a suspension of a practising certificate can follow in that hearing. But, armed with the result in the s. 103 application, there seems to be nothing to stop the client sending the reasons in to the regulator and requesting investigation of the conduct already determined to be misconduct by the body which would hear any charge flowing from the investigation. And so, of course, there seems to be nothing to stop the client from threatening to do so in little spats over fees.
In Hoover Slovacek LLP v. Walton, Supreme Court of Texas, 3 November 2006, the Court severed a provision in a contingency fee agreement which entitled the lawyer to three-tenths of the “present value of the claim” forthwith upon termination by the client, whether for just cause or not. Instead, the lawyer recovered three-tenths of the actual recovery, and only once there had been a recovery. Continue reading “Texas Supreme Court strikes down contingency fee agreement provision”
The Bar has produced a practice guide. It is a great achievement and stands as a beacon for the Law Institute’s future efforts at promulgating knowledge of the practice rules. The Bar actually has something called the Professional Standards Education Committee. Written by Roisin Annesley, it was launched by Victoria Marles, the Legal Services Commissioner on 18 October 2006, and distributed free to every member of the Bar. Annesley has done a lot of work as Counsel Assisting the Legal Profession Tribunal (and continues to do occasional work assisting the Legal Practice List at VCAT). A doyen of professional discipline, Paul Lacava SC, and a judge who has excoriated Professional Standards, Justice Gillard, are credited with substantial involvement. It has chapters on: Continue reading “Roisin Annesley’s Victorian Barristers’ practice guide”
Update, 21 April 2008: see the decision on appeal: McNamara Business and Property Law v Kasmeridis  SASC 90.
Original post: Kesmeridis v McNamara Business and Property Law  SASC 200 is a decision of a Master of the Supreme Court of South Australia. Decisions in such applications in Victoria are heard by the members of VCAT’s Legal Practice List. The decision, and several related decisions, (i) say that a costs agreement reduced in writing need not be signed by both parties to be a contract in writing as required by the relevant statute, (ii) say that whether a costs agreement is “fair and reasonable” is to be determined by reference to pre-contract conduct, (iii) say that a discretion to charge a premium over and above an hourly rate is easily severable from a costs agreement and does not require the whole agreement to be set aside, and (iv) demonstrate that the courts’ distrust of hourly rate costs agreements is not waning with time.
Though the clients had been defendants in 35 proceedings before the relevant retainer and so “were not as ignorant of the legal system as they might have claimed”, the costs agreement was set aside in part because the solicitors had not explained to their prospective clients that there were other solicitors in Adelaide who would have been willing to do the same work on scale. Continue reading “Supreme Court authority on setting aside costs agreements”
Gee do plaintiffs adore sprinkling a bit of fiduciary duty action into their pleadings against solicitors. Their counsel see it as moon dust. A sophisiticated plaintiff (who had been party to separate litigation which eventually culminated in a High Court case about contractual certainty) tried it on in a somewhat novel way in Equuscorp Pty Ltd v Wilmoth Field Warne (No 3)  VSC 164 but bombed out before Justice Byrne. Continue reading “Fiduciary duties and the sophisticated client”