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Federal Court says Jarndyce v Jarndyce is to be kept front of mind by Costs Courts

For some reason I have agreed to give a seminar on the ethics of billing by the hour, one of those topics so big that I have until now avoided tinkering around the edges of it.  My distinguished collaborators, who will give separate papers at the 7 September 2011 seminar in Melbourne, will be Costs Judge Jamie Wood and Liz Harris, head honcho at Harris Costs Lawyers.  My researches begin here, today, with a look at a recent decision of Justice John Logan of the Federal Court in Queensland who has a few days ago delivered a leviathan costs judgment (Wide Bay Conservation Council Inc v Burnett Water Pty Ltd (No 9) [2011] FCA 661) in which he awarded solicitor-client costs against the applicant in respect of failed allegations of misconduct and said:

‘Some of the language employed in [the scale] in respect of particular items is indeed redolent of a 19th century legal office – “engross” and “folio”, for example. This acknowledged, to approach the subject of how much reasonably to allow in respect of legal costs by recalling the works of Charles Dickens may not, with respect, necessarily be a bad thing.’

His Honour then went on to catalogue judicial diatribes against the billable hour, via a reference to Bleak House: Continue reading “Federal Court says Jarndyce v Jarndyce is to be kept front of mind by Costs Courts”

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Applicants for taxation can call for other side’s costs agreement and bills

Update: for the incredible backstory to this latest piece in the litigation over $705 in repairs to Mr Kuek’s Toyota Camry, see this story at Justinian.  You will have to subscribe for $22.

The indemnity principle in costs law says that an award of party party costs must never exceed the beneficiary’s liability to his or her own lawyers.  That is, party party costs must not exceed solicitor-client costs.  Traditionally, however, those ordered to pay costs by a court have not been allowed to look at the costs agreement or bills between the party whose costs they have been ordered to pay.  Kuek v Devflan Pty Ltd [2011] VSCA 25 says that at least where there is some reason to believe that the indemnity principle might be infringed, the costs disclosure letters, costs agreement, and, probably, solicitor client bills may be inspected by the party ordered to pay the costs, and used to argue the application of the indemnity principle.

Justice of Appeal Hansen, with whom Justices of Appeal Neave and Harper agreed, said that the Taxing Master’s view that ‘the course proposed [requiring production of the costs agreement and costs disclosures, and having regard to them in the taxation] will lead to the taxation of two different bills with additional delay, expense and inconvenience … is a floodgates type argument which is no answer to a taxing officer’s fundamental duty to conduct each taxation on its own merits in accordance with law.’  His Honour continued:

‘This type of issue will not often arise because, in the ordinary case, party / party costs fall well short of the receiving party’s actual liability to its lawyers.  But, as I have noted, here the material is sufficient to suggest that the position may be otherwise.  It follows that the taxing officer must be satisfied that, as a question of fact, the party / party costs do not exceed the respondents’ liability to their lawyers.  Both the Taxing Master and the judge seemed to assume that the consequence of such a factual exercise would be the (inconvenient) step of requiring the respondents to produce a solicitor / client bill, and that there was nothing in the authorities to require a solicitor / client bill.  However it does not follow that the factual question posed can only be determined by reference to a solicitor / client bill.  It may be readily apparent on the face of the lawyers’ accounts that the receiving party has actually paid its lawyers more than the amount of the party / party bill.’

Many lawyers do not enter into proper costs agreements with their clients, because they trust them to pay the bills.  Most lawyers, for a variety of reasons, do not comply perfectly with the costs disclosure regime, but get away with it because their clients are happy with their services and charges, or are ignorant of the consequences of costs disclosure defaults.  This decision constitutes a reason why it is important to have a valid costs agreement and to comply with the costs disclosure obligations: otherwise the party may recover less on a party party costs award than he or she otherwise would.  The decision whether to do things properly is no longer just a decision about whether to take the risk that the client will unexpectedly take advantage of the law, but must be taken in the context of the lawyer’s duty of care to avoid foreseeable economic loss to the client.

Continue reading “Applicants for taxation can call for other side’s costs agreement and bills”

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The prudent way to plead a suit for fees

The case which was the subject of the previous post, Quaresmini v Crouch & Lindon (a firm) [2010] FMCA 750, and Chadwick Lawyers v McMullen [2009] FMCA 992, decisions of Federal Magistrates Wilson and Jarrett sitting in Brisbane suggest what I have long suspected: that it is dangerous to use traditional precedents for suing for legal fees.  The relevant bit from Quaresmini is set out in the previous post, and that from McMullen is set out at the end of this post.  Although Federal Magistrates’ views on pleadings may not necessarily be listened to by state courts, the endgame of your suit for fees, bankruptcy, may well be played out there.  Quaresmini is an illustration of how things can go wrong in the endgame.

Before a Victorian solicitor can sue for fees, she must show that 65 days have elapsed since service conforming with the Legal Profession Act, 2004 (Vic.)’s s. 3.4.34(5) of a bill conforming with ss. 3.4.34 and 3.4.35: so says s. 3.4.33. The requirements for clients other than ‘sophisticated clients’ are:

  • the bill must be signed appropriately (generally, by a lawyer);
  • it must be served properly (by post, in person, or delivered to the address of the client or his agent authorised to accept legal process, or left with a person who looks at least 16, apparently living or working at the client or agent’s usual or last known residential or business address, but not by fax or email); and
  • it must include or be accompanied by a written notice (presumably correctly) setting out the options and time limits for challenging it.

These two decisions suggest that at least these matters ought to be pleaded, along with the basis for the claim for fees.  If the basis is a costs agreement, then of course that is a contract which ought to be pleaded like any other contract.  If the basis is a scale, then it may be necessary to plead facts which attract the scale to the work.  If the basis is the fair and reasonable basis, then the fact that there was no costs agreement and no scale applicable would need to be pleaded, at least.

Is anyone else aware of any other authority on this point, or does anyone have experience of this point having been taken?

Continue reading “The prudent way to plead a suit for fees”

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Here’s why you should comply with the costs disclosure regime

Quaresmini v Crouch & Lindon (a firm) [2010] 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”

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Will clients be entitled to seek itemised bills within 7 days under the Australian Consumer Law, 2010?

Patrick Oliver, the head honcho at a cool little Melbourne-based consultancy to incorporated legal practices called Lexcel, has drawn my attention to s. 101 of the Consumer Law, 2010.  It provides for ‘consumers’ to request itemised bills from service providers, and requires that they be provided within 7 days, in default of which a pecuniary penalty may be levied.  Sub-section (5) says ‘The supplier must ensure that the itemised bill is transparent.’

There is no carve-out for lawyers. I would not be surprised if the double-regulation is fixed by legislative amendment.  Meanwhile, however, the full text of s. 101, which commences on 1 January 2011, is as follows: Continue reading “Will clients be entitled to seek itemised bills within 7 days under the Australian Consumer Law, 2010?”

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Can you piggy-back the taxation of an old interim bill onto a taxation of a fresh final bill?

Update, 22 February 2012: Another judge of the Queensland District Court has preferred the NSW position over the Victorian position: Golder Associates P/L v Challen [2012] QDC 11 (Samios DCJ).

Update, 14 August 2011: The decision is at odds with decisions of judges of NSW’s and Queensland’s District Courts: Retemu Pty Ltd v Ryan (NSW District Court, Coorey DCJ, 4300/08 and 4301/08, 16/4/10, unreported), which Costs Judge Wood did not follow in the decision which is the subject of the post below (Dromana Estate), and Turner v Mitchells Solicitors [2011] QDC 61 (McGill DCJ), which prefers the reasoning in Retemu to that in Dromana Estate.

Original post: Under the Legal Profession Act, 2004, clients have a year to apply for taxation of their solicitor’s bill.  Before, it was 60 days, but it was easy to get an extension: s. 3.4.38(5).  Now, it’s longer, but it’s harder to get an extension: you have to make an application to a judge in the Practice Court, and the test is stricter.  Section 3.4.37, though, says:

‘(1) A law practice may give a person an interim bill covering part only of the legal services the law practice was retained to provide.

(2) Legal costs that are the subject of an interim bill may be reviewed under Division 7, either at the time of the interim bill or at the time of the final bill, whether or not the interim bill has previously been reviewed or paid.’

In Dromana Estate v Wilmoth Field & Warne [2010] VSC 308, the artist formerly known as the Taxing Master, the Supreme Court’s Costs Court’s Costs Judge Wood, ruled in favour of submissions made by Daryl Williams and supported by Richard Antill of counsel.  They submitted that a client may never, without special permission, have a taxation of a bill more than a year old, even an interim bill sought to be taxed at the same time as a final bill younger than a year.  So there you go: once a year has gone by after the rendering of an interim bill, the solicitor only has to fear an application for leave to tax bills out of time.  Unless of course he or she has failed to comply with any aspect of the disclosure requirements (such as the obligation to give disclosures before or as soon as practicable after retainer, the obligation to update disclosures already given if circumstances change, and the obligation to give pre-settlement disclosure of what the client will get in his or her pocket after costs), in which case the solicitor is not entitled to recover fees, and the client need not pay fees, until the bills have been taxed, presumptively at the solicitor’s costs: s. 3.4.17.  The sombre solution for the solicitor, in that case, is to apply for taxation of his or her own costs under s. 3.4.40.  There is no time limit under the Legal Profession Act, 2004 for doing so.

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The Costs Court

I have been remiss in not bringing to your attention the creation of the Costs Court, which came into operation at the beginning of this year.  It is in fact not really a new Court, in the sense that it is just a revamped division of the Supreme Court.  But the development means that the number of dedicated costs decision makers in the Supreme Court has increased from one to three. It heralds a new era in the hitherto fragmented, inconsistent and arcane world of legal costs.  The air of change is enhanced by the relatively recent change of guard at the top from long-time and generally well-loved incumbent, Master Tom Bruce as Taxing Master to Associate Justice Jamie Wood as Costs Judge.

Greater consistency between decisions in relation to costs in the different state courts and VCAT will be promoted by all their taxations being conducted by the one new institution, in the same place, under the ultimate control of the Costs Judge.  The County Court’s former taxing officers have become Registrars.  They used to do taxations of Magistrates’ Court cost orders as well, and the new reality is that no more taxations will be conducted by officers of VCAT, the Magistrates’ Court, or the County Court.  That is not to say, of course, that VCAT members, Magistrates and County Court judges, will not fix costs summarily by reference to the appropriate scale at the end of a case though. But I can’t think of a decision maker who relishes fixing costs, and the temptation to leave it to the Costs Court may mean judges and Magistrates fix costs less.

There is an anomaly which should be cured. VCAT will continue to hear applications to set aside costs agreements, and ‘costs disputes’ under the Legal Profession Act, 2004, in relation to disputes over fees in matters where the total costs are not more than $25,000, whereas solicitor-client taxations (which are often stayed pending, for example, the result of applications to set aside costs agreements) are carried out by the Costs Court.  It would seem appropriate to me for those jurisdictions to be brought into the Costs Court, and re-built into one stand-alone system for the resolution of solicitor-client disputes over fees, to operate under one statute (e.g. the Legal Profession Act, 2004) rather than the present jumble of that Act, the Supreme Court Rules, 2005 the Supreme Court Act, 1986, the VCAT Act, 1998 and the Fair Trading Act, 1999.  The wealth of experience of the members of the old Legal Profession Tribunal, now VCAT’s Legal Practice List, could and should be brought into the Costs Court.

Here is Practice Note no. 7 of 2010, about the Costs Court.  The Costs Judge’s associate is Sean Linehan whose numbers are 9603 9324 and 9603 9320.

Section 17D(3) of the Supreme Court Act, 1986 now provides that the Costs Court ‘must exercise its jurisdiction with as little formality and technicality, and with as much expedition, as the requirements of this Act, the Rules and the proper consideration of the matters before the Court permit’.  Another innovation is that the Costs Court is newly empowered to give on the papers estimates of the amount a bill is likely to tax at, which may be made into an order if no objection is raised by either party within 21 days: see Part 8 of Order 63: new rules 63.86 – 63.89.  The Federal Court has been doing so for years, a service much appreciated by practitioners.

Continue reading “The Costs Court”

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What are ‘legal proceedings to recover legal costs’?

A barrister rang me the other day in relation to what he probably thought was a simple question: if a lawyer settles a dispute about legal costs and then sues for specific performance, is it a ‘proceeding to recover legal costs’?  No, I said, but I could not find, on my blog, or anywhere else where I store things for later use, authority for the proposition.  Now I have come across the authority I had in the back of my mind and have forgotten who asked the question.  So here it is, for the whole world to enjoy: Koutsourais & v Metledge & Associates [2004] NSWCA 313.  In fact, it is not authority for the proposition I had in my mind, since one judge held in favour of the proposition, one against, and one abstained from deciding the case on that issue.  Its investigation of previous cases is nonetheless useful, and it and those cases provide a useful jumping off point for anyone who needs to research the issue.  It has been considered subsequently, in cases published on Austlii, in these cases.  The ones I have looked at suggest that the proposition is a good one, at least where the character of the settlement agreement is sufficiently removed conceptually from the original indebtedness, but don’t quote me on that tentative conclusion.  Anyone know of any Victorian authority on the question? Continue reading “What are ‘legal proceedings to recover legal costs’?”

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What is a ‘lump sum bill’?

In the law of legal costs, there has long been a distinction between a lump sum bill, of the kind generally given in the first instance by solicitors to clients with whom they have an ongoing working relationship, and an itemized bill which is usually given if a client wants a bit more detail in relation to how the hell legal costs could possibly have blown out to the amount stated in the lump sum bill.  Where the solicitor-client relationship is under a fair bit of strain, or has broken down, itemized bills are sometimes given in the first instance.  They were, and sometimes still are, known also as bills of costs in taxable form.  There is quite a bit of law on what is necessary for a bill to qualify as an itemized bill, but not all that much about what is necessary to qualify as a lump sum bill.  The difficulty is exacerbated by the lack of definition of ‘lump sum bill’ in s. 61 of the Supreme Court Act, 1986 or its successors the Legal Practice Act, 1996 or the Legal Profession Act, 2004.

My friend Richard Antill gave me an old decision of the Supreme Court of Victoria on the question, Stevens v Keogh, unreported, 3 December 1996, Justice McDonald.  Contact me if you would like a copy. A solicitor sued his client for fees. The client defended, called no evidence at trial, and successfully contended that the solicitor’s evidence disclosed no case to answer.  The letter under cover of which the controversial bills was given said:

‘I confirm that at our first meeting I stated that my charge would be at the rate of $150 per hour or pro rata per part.  Accordingly my account simply lists the times spent on the work for you’.

The bill itself said:

Continue reading “What is a ‘lump sum bill’?”

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From when can solicitors claim interest on an unpaid bill?

Under s. 95 the Legal Practice Act, 1996, interest was chargeable on bills of costs from the period from 30 days after payment is demanded until the bill is paid.  But what does it mean?  Does interest start to run 3o days after (i) the date of the bill, (ii) the day it was posted, (iii) the day it was received, (iv) the day at the end of the period which the costs agreement says payment is to be made within, or (v) the due date for payment stated on the bill?  In this post, I hazard an answer, and note the different provision now to be found in the Legal Profession Act, 2004, following its amendment which I posted about here. Continue reading “From when can solicitors claim interest on an unpaid bill?”

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Termination of a no-win no-fee retainer

Mr Burmingham is the subject of three posts already.  They dealt with three discrete aspects of his case, Maurice B Pty Ltd v Burmingham [2009] 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”

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Lawyers and the criminal law

Reproduced below is a blog post about ‘bill padding’ from the US site, Legal Blog Watch. That is where lawyers say work took them longer than it really did, and so charge commensurately more, or even make up the fact that they did work, and charge for it. Sometimes I read articles like this and wonder whether lawyers don’t think they live in a different world where, if they commit crimes, what will happen to them is that they will be dealt with by professional discipline. They think that, or course, because it’s more or less true, unless you get caught stealing from your trust account.  But the criminality of time sheet crime should not be allowed to be buried under anodyne euphemisms. ‘Bill padding’ sounds kind of cute, a necessary evil. It is a kind of newspeak. Time to do away with it. Let’s call it ‘rapacity fraud’.  It is tolerated by the profession in this sense.  There are generalised allegations of widespread bill padding.  Talk privately to costs consultants and they will tell you all about it.   But I have never heard of a firm which has even basic anti-fraud procedures to detect the practice.

My point kind of makes itself when the author says ‘allegations of bill padding … drew … strong criticism about the practice from legal ethics experts’.  Experts say fraud is bad?  Well shit Sherlock!  The 9th commandment does kind of feature relatively prominently in most systems of law.  We’re going to have the case one day when someone actually subpoenas a firm’s electronic billing system and its metadata, and diaries, analyses when the billing entries were made, and cross-examines lawyers on how they could have billed 180 units in a day and still made it to the client function at 6 p.m., or why, having billed relatively consistently every day, they would suddenly remember on the 30th of the month some comparatively vaguely described units they had forgotten to record mid-month, or why given that they had used a precedent for similar documents three times previously in the same month, they decided to draft the document from scratch, only to end up with — you guessed it — the same document as the precedent.  Now, that article: Continue reading “Lawyers and the criminal law”

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Is interest a form of relief VCAT can grant?

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.

Continue reading “Is interest a form of relief VCAT can grant?”

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VCAT rewrites unrepresented man’s misconceived application

Slobodan Catovic did not want to pay his solicitor’s bill. He misconceivedly invoked the Legal Profession Act, 2004 provision which allows clients to apply to set aside costs agreements, but that is not what he wanted to do. Senior Member Howell satisfied himself that Mr Catovic had intended to bring an application under the Fair Trading Act, 1999, and ordered that the application be treated as a small claim under that Act. He even told the Registrar to refund Mr Catovic the difference between the fee on an application to set aside a costs agreement and the paltry fee payable on the institution of a small claim under the Fair Trading Act, 1999. See Catovic v H Solicitors [2008] VCAT 840. On the propriety of the cross-fertilisation of VCAT’s jurisdictions, see also this post.

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Chakera v Kuzamanovic [2003] VSC 92

Chakera v Kuzamanovic [2003] VSC 92 is a decision of the Supreme Court of Victoria’s Justice Nettle in relation to the effect of a default under the costs disclosure regime under the Legal Practice Act, 1996. It stands for the proposition that in the case of complete non-compliance with the costs disclosure regime, the solicitor is still entitled to recover legal costs, albeit possibly on a reduced basis. The consequences of non-disclosure were spelt out in s. 91 of the Act. That section made it clear that costs were recoverable on a quantum meruit basis even where there was no valid costs agreement. All sounds pretty obvious now, but a Magistrate, tactfully unnamed, was adamant that non-compliance with s. 86 of the Legal Practice Act, 1996 meant that no fees for work done in a retainer could be recovered. ‘Nonsense!’, Justice Nettle said.

Today, the correlate of s. 86 of the old Act is s. 3.4.9,and the correlate of s. 91 is the rather more complicated s. 3.4.17.

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VCAT runs out of patience with serial adjourner

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 [2007] 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”

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VCAT cancels bill and leaves solicitor wholly unremunerated for sloppy work

Praag v W & T Lawyers [2008] VCAT 307 was a rare thing: a case in VCAT’s Legal Practice List actually prosecuted pursuant to the Legal Profession Act, 2004. Mr Praag was his late mother’s executor. Before her death, she lived in Canberra. Her assets were a house in Canberra and $50,000 cash. Mr Praag went to the respondent solicitors who said they would get probate of the will for $2,800. The scale cost for doing so was $499. They did not otherwise comply with the costs disclosure regime in the Legal Profession Act, 2004. In fact it was unnecessary to get probate in Victoria, and it would have been better to have got it in the ACT. Though Mr Praag was able to withdraw the cash from the Bank with the Victorian parchment, he was unable to deal with the house unless he resealed the probate in ACT, which cost a bit extra on top of the cost of getting probate. Member Butcher mentioned several ‘concerns’ he had before concluding: Continue reading “VCAT cancels bill and leaves solicitor wholly unremunerated for sloppy work”

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Once the time for taxation runs out, the solicitor can sue on the bill as a simple debt

I have never been quite clear about what you have to prove in a suit for fees. I was attracted to the proposition that if a client wants to go through a bill item by item, the place to do that is in a taxation, and if they do not go down that path, or they can’t because they’re out of time, then no challenge of the kind typical of a taxation ought to be allowed in the suit for fees, that is, that the bill may be sued on as a debt due and owing. But I was never entirely confident about it.

The Full Legal Profession Tribunal’s 16 June 2000 decision in B v Home Wilkinson Lowry [1999] VLPT 1 is authority for many things (principally that state tribunals like VCAT have no jurisdiction over the costs of Family Court proceedings), and seems to be authority too for the proposition which attracted me. Continue reading “Once the time for taxation runs out, the solicitor can sue on the bill as a simple debt”