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WARNING: costs agreements and bills require amendment

Since 6 December 2007, the maximum interest chargeable on bills has dropped from 12% (the penalty interest rate) to the Reserve Bank Target Rate +2% (at the time of writing 8.75%), and the period of non-payment after which you can begin charging has changed too. You need to amend your bills because if you don’t put the right statement on them, you won’t be able to recover interest unless you dream up some sophisticated arguments. In the case of ongoing retainers, you probably need to send the first new bill of the new regime under cover of a letter advising a change in the rate applicable to unpaid bills. Otherwise, you might fall foul of the ongoing obligation to disclose any substantial changes to anything previously disclosed.

You do not have to express the interest chargeable as a percentage rate per annum. In my experience, the only time anyone ever charges interest is when suing for fees, after the relationship has broken down, or demanding payment of fees as a condition of staying on the record or giving up a file subject to a lien. Perhaps that was because the rate was so punitively high, and perhaps because too few people knew about the penalty interest rate calculator on the internet. Why not set a lower rate which is dead easy to calculate and actually make a habit of collecting interest? So long as the rate you are effectively charging works out lower than what you would charge if you charged the maximum annual percentage rate over the same period, you’ll be sweet. Read on to find out the answer to the questions someone in your firm is sure to ponder at some stage in the future: does it apply to bills given before 8 November 2007? Does it apply in retainers in which instructions were first taken before that date?

Continue reading “WARNING: costs agreements and bills require amendment”

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How to calculate interest on post-5 December 2007 bills in Legal Profession Act, 2004 (Vic.) matters

What follows assumes that you have not made any special agreement in a costs agreement, and so the default position applies. It is truly an idiot’s guide because (i) I have great sympathy for people who have difficulties with numbers, and (ii) I well remember how grateful I was when a partner of Middletons, Mark Howard, showed me as an articled clerk how to calculate penalty interest. Continue reading “How to calculate interest on post-5 December 2007 bills in Legal Profession Act, 2004 (Vic.) matters”

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Ways for lawyers to cope with costs disclosure defaults

Under Victoria’s Legal Profession Act, 2004 the most apparently draconian consequences follow for the slightest non-compliance with any of the elaborate pre-retainer disclosures required to be made by solicitors. Under s. 3.4.17, if the lawyer has not disclosed something required by the relevant bit of the Act to be disclosed:

  • the client ‘need not pay the legal costs until they have’ been taxed as between solicitor-client in the Supreme Court, generally at the solicitor’s expense;
  • the solicitor ‘may not maintain proceedings … for the recovery of legal costs’ until the end of such a taxation; and
  • the client ‘may apply … to set the costs agreement aside’.

In Dennis v Cameron [2007] NSWCA 228, the New South Wales District Court and its Court of Appeal unanimously decided a case about failures to disclose various things in a bill of costs (and by operation of NSW legislation, the result was that no suit could be brought on it for recovery of fees claimed in it). If the case is followed in Victoria and extended to pre-retainer costs disclosure defaults, some balance might be introduced into the unprecedentedly strict regime introduced on 12 December 2005, which I reckon the profession is just beginning to feel the bite of. I was in VCAT’s Legal Practice List today battling over my solicitor client’s bill of costs, and she was certainly complaining. The decision suggests that:

  • the defects may be waived by the client, after which he or she will be estopped from relying on them (at [39] having cited In re Gedye (1851) S.C. 20 L.J. Ch. 410);
  • little compromises in relation to outstanding fees may amount to fresh contracts which may be sued on even if the original bills could not, so that the subsequent suit is not ‘to recover legal costs’ but is for breach of the compromise, and so is not barred by the prohibition on maintaining such suits before completion of a taxation (trial judge’s judgment, see Court of Appeal’s judgment at [22], citing Koutsourais v Metledge & Associates [2004] NSWSC 313; and
  • it is unnecessary to disclose to a client that which he already knows (at [46], citing Hogarth v Gye [2002] NSWSC 32 at [25].)

The decision is a wake up call to the profession which tends to be unable to focus on anything other than the legislation. But the legislation is not a code. A costs agreement remains a contract, and all the law that flows around contracts — including equity — can be brought to bear, to the extent not inconsistent with the legislation. There is a lot of law about retainers and costs agreements, and it can be worth looking up (undoubtedly the best place to start is Dal Pont’s Law of Costs in Australia). There is also much room for original thought by those who have a good grip on the law of obligations. Continue reading “Ways for lawyers to cope with costs disclosure defaults”

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Bills of costs must be signed by principals or employees: what does that mean?

Update: 6 January 2008: Pinna v Kuek [1999] VSC 204 is a decision about the correlative section under s. 107, Legal Practice Act, 1996, which said (2) A bill of costs – (a) must be signed by – (i) the legal practitioner…’. O’Bryan J held that a letter signed by the legal practitioner enclosing a 10 page unsigned itemised bill of costs satisfied the requirements of the provision. Now that is made clear by the Legal Profession Act, 2004, since amendments which came into operation in 2007. The provision is s. 3.4.34(2A). Furthermore, it is no longer necessary for a partner of a firm to sign a bill. Any lawyer, including employees of the law practice rendering the bill may do so: s. 3.4.34(2).

Dennis v Cameron [2007] NSWCA 228 is a very interesting case about bills.

Original post: The law on what constitutes a signature is:

‘the fact an actual signature is not the result of the act of signing is not critical to the validity of the document. Even a form with a signature impressed upon it by a printing machine[6] or where the person signing places upon the document an engraved representation of that person’s signature by means of a rubber stamp[7] have been held to satisfy the statutory requirement of a signature. A telex signature has also been held to be sufficient to constitute a proper signature.8] The critical element appears to be that the signature must also contain the additional characteristic that the person making the mark approves of the contents of the document.’*

Hoeben J said much the same thing at [42] in Dennis v Cameron [2007] NSWCA 228 in the context of a NSW statutory provision which says that a bill of costs must be signed by a partner of a firm, or by a barrister, or an employee of either. That case is also the subject of the next post. Continue reading “Bills of costs must be signed by principals or employees: what does that mean?”

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Unrepresented barristers’ entitlement to costs in cases involving them personally

In Winn v GHB [2007] VSC 360, a barrister was personally a party in some litigation. She was admitted in Victoria but at the relevant time was practising in Brisbane under a Queensland practising certificate. She taxed her solicitors’ fees, and acted for herself. She appealed successfully from the order of the Taxing Master. She successfully sought an order for costs, but the only costs she was entitled to were costs of travelling to and from Victoria from Queensland for the hearings because the exception to the rule that unrepresented litigants are not entitled to costs except for out of pocket expenses applies only to solicitors and does not extend to barristers. Continue reading “Unrepresented barristers’ entitlement to costs in cases involving them personally”

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Arbitrators slice $40 million off plaintiff lawyers’ breast implant proceedings fees

22 July Update: what may be the first ever legal blog, and without doubt one of the best, Overlawyered has  a link to the arbitrator’s ruling, and links to some old posts dealing with the interlocutory stages of the case. And here’s Law.com’s article.

Houston plaintiff lawyer John O’Quinn has been ordered to repay clients $40 million in legal fees after he was found to have charged his clients for bar association fees, overheads, and flowers as part of a ‘general expenses fee’ of 1.5% of the settlement. Ironically, his former clients ganged up on him. In a class action. They wanted all the fees he charged them back — estimated at $0.66 billion:

‘A Texas Supreme Court case from 1999 opened O’Quinn up to the possibility of having to pay back all the collected legal fees. That case, Burrow v. Arce, held that if a lawyer breaks his fiduciary duty to a client by putting his own interest above the client’s, he can lose part or all of his fee — even if the lawyer did a good job.’

I’ve noted that case before. Scary. Not that he got away without penalty, exactly:

‘The order says that O’Quinn, through three legal entities under which he has practiced law, must pay back [AU$12] million he improperly charged clients and a [AU$28.5] million penalty because he broke his contract with them.

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Unconscionability and legal fee estimates, again

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 [2007] 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”

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Supreme Court authority on setting aside costs agreements

Update, 21 April 2008: see the decision on appeal: McNamara Business and Property Law v Kasmeridis [2007] SASC 90.

Original post: Kesmeridis v McNamara Business and Property Law [2006] 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”

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VCAT has no jurisdiction over Family Court fee disputes

VCAT does not have jurisdiction over costs disputes in relation to Family Court cases or to state Magistrates’ Courts exercising the Family Court’s jurisdiction (except to the extent it is exercising jurisdiction under ss 35 or 35B of the Bankruptcy Act, 1966), but does have jurisdiction in relation to costs disputes in relation to Federal Magistrates’ Court proceedings under the Family Law Act, 1975. Continue reading “VCAT has no jurisdiction over Family Court fee disputes”

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Winner gets indemnity costs but recovers less when loser proves winner’s costs agreement with his solicitors void

Casey v Quabba [2006] QCA 187

As reported in Lawyers Weekly, the Queensland Court of Appeal said the trial judge should have allowed the unsuccessful party in litigation to call for and challenge the validity of the successful party’s costs agreement with his solicitor in a party-party taxation of costs on an indemnity basis. Further, the judges found the successful party’s costs agreement was void for failure to specify the minimum requirements fora costs agreement, and ordered the costs to be taxed on the basis that there was no valid costs agreement (presumably by reference to the court scale). Don’t get too excited though; the case turned in part on the facts that (i) the taxing officer was directed by the rules of court to have regard, in indemnity costs taxations, to the costs agreement of the successful party, and (ii) the purpose of the Queensland provision was not only to benefit the client party to the agreement, but also to protect third parties affected, such as those against whom costs orders are made.

But I do wonder whether any thought was given by the successful party and the solicitors hastily putting together a valid agreement with retrospective operation. I can see no reason why it should not work.

Continue reading “Winner gets indemnity costs but recovers less when loser proves winner’s costs agreement with his solicitors void”

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The new r. 3.4.3, Legal Profession Regulations, 2005 (Vic.)

Section 15 of the Legal Profession (Amendment) Regulations, 2007 inserted a new s. 3.4.3 into the Legal Profession Regulations, 2005 (Vic.). This is it, with my parenthesised interpolations:

‘3.4.3 Interest on unpaid legal costs

(1) This regulation is made for the purposes of section 3.4.21(4) of the [Legal Profession Act, 2004] and prescribes the rate of interest in excess of which a law practice may not charge interest under section 3.4.21 of the Act or under a costs agreement.

(2) The rate for the period commencing on and including the first commencement day and ending immediately before the second commencement day is the rate fixed under section 2 of the Penalty Interest Rates Act 1983 as at the relevant date.

(3) The rate for the period commencing on and including the second commencement day is the rate that is equal to the Cash Rate Target as at the relevant date, increased by 2 percentage points.

(4) In this regulation—

Cash Rate Target means the percentage (or maximum percentage) specified by the Reserve Bank of Australia as the Cash Rate Target;

first commencement day means the day on which regulation 15 of the Legal Profession (Amendment) Regulations 2007 comes into operation [r. 3(2) says reg 15 comes into force 6 months after the rest of the Regulations; r. 3(1) says the rest come into operation on the date they are made, which was 8 May 2007, so the first commencement day is 8 November 2007];

relevant date means the date the bill was issued by the law practice concerned;

second commencement day means the day that is 28 days after the first commencement day [6 December 2007].’