When does the 12 months in which to seek taxation commence?

In Victoria, solicitors have only a non-extendable 60 days in which to seek taxation of counsel’s fees, but clients have 12 months in which to seek taxation of solicitors’ fees, and clients other than ‘sophisticated clients’ as defined may seek an extension of time in which to apply.  Where the greatest uncertainty exists, in my mind at least, is in the case of suits for taxation by third party payers — non-clients who promise to pay others’ legal fees, and most particularly non-associated third party payers — non-clients whose promise to pay others’ fees is made to the client rather than to the lawyers.  I imagine that solicitors do not generally give bills to non-associated third party payers, such as the mortgagors to whom their clients lend money under documents which require the mortgagor to pay the mortgagees’ costs.  Rather, I imagine that the mortgagees generally just demand a sum from the mortgagor as an adjustment at settlement, and hand over the bill from their lawyers only upon demand.  Yet non-associated third party payers are entitled to seek taxation, and the question is — when does the time in which such a taxation may be applied for begin to run?

I must warn you that the rest of this post is likely to be extremely boring for most people, and understanding it, despite my attempt to state it as clearly as I can, is likely to involve considerable mental effort.

In Viscariello v Oakley Thompson [2012] VSC 351, Justice Ferguson decided a dispute between an individual who guaranteed his company’s obligation to pay the company’s legal fees, and the company’s lawyers.  The individual was presumed for the purpose of argument to be an associated third party payer, which seems like a very reasonable assumption to me. The dispute was about when the time limits commenced.  But the judgment does not resolve many mysteries, because it seems that the company and the director received the bills simultaneously, and though no bills were addressed to the guarantor qua guarantor, since he in fact received the bills at the time the company received them, time started to run from then. Continue reading “When does the 12 months in which to seek taxation commence?”

Party-party recovery of pre-proceedings costs

Her Honour Davies J considered the recoverability of pre-action costs in the context of an application for security for costs.  The defendant sought security for $1 million already expended prior to the commencement of the proceedings against it, but after the plaintiffs gave media publicity to their intention to proceed them.  Her Honour decided that such costs could form part of the costs in respect of which security for costs may be ordered, and did include an allowance for such costs in her grant of security in the sum of $6 million.  My fellow blogger Liz Harris of Harris Costs Lawyers’ expert opinion as to the NAB’s likely costs was largely accepted. The decision is Pathway Investments Pty Ltd v National Australia Bank Limited [2012] VSC 97. In relation to the basic principle relating to the recoverability of pre-action costs, more usually claimed by plaintiffs, her Honour said: Continue reading “Party-party recovery of pre-proceedings costs”

Accord and satisfaction as a defence to a suit for taxation

[Edited and updated 13.2.12] I have two taxations at the moment where accord and satisfaction is pleaded as a defence, in proceedings governed by the Legal Profession Act 2004 (Vic).  In the first, the client and the solicitor cut a deal in relation to costs, and the client subsequently sought to tax the costs.  In the second, a non-associated third party payer and the client cut a deal in relation to the amount the former was obliged to pay the latter pursuant to a loan agreement, and the third party payer has now brought an application against the client’s solicitors for taxation.

Accord and satisfaction is a litigation estoppel.  It serves a similar function to res judicata where the original dispute is quelled by contractual agreement (i.e. a ‘settlement’) rather than by judicial determination. It is what stops a party who settles a pre-litigious dispute from suing on it, and, depending on how the proceeding is disposed of (withdrawn, discontinued, struck out, dismissed, judgment for one party), may also be what stops a party to litigation who settles it from re-instituting it (res judicata flowing from the Court’s orders disposing of the proceeding is the other possibility).

Helpfully, the NSW Court of Appeal recently drew the authorities on accord and satisfaction together in El-Mir v Risk [2005] NSWCA 215 and provided a cute little restatement of the law, which is reproduced below.  There seems to be little authority on accord and satisfaction preventing taxation where disputes in relation to the quantification of liability for legal fees are settled before the institution of taxation proceedings. Certainly, the US Court of Appeals for the Third Circuit had no difficulty with the application of accord and satisfaction as a bar to taxation: Michael J Benenson Associates, Inc v Orthopedic Network of New Jersey 2002 U.S. App. LEXIS 23559; 54 Fed. Appx. 33, and the Federal Court seems to have assumed the possibility in Amos v Monsour Pty Ltd (formerly Monsour Legal Costs Pty Ltd) [2010] FCA 741, but in neither case was the question argued. Does anyone know of any other useful authorities? Continue reading “Accord and satisfaction as a defence to a suit for taxation”

The Keddies overcharging civil case no. 1

Liu v Barakat, unreported, District Court of NSW, Curtis J, 8 November 2011 is the latest in an ongoing scandal in NSW in relation to overcharging by a prominent personal injuries practice which traded as Keddies, but has subsequently been gobbled up by a publicly listed company.  Many are unhappy at the strike rate of the NSW Legal Services Commissioner in the whole affair (the sole remaining disciplinary prosecution is two and a half years old and not heading to hearing until April next year), but now the District Court has given judgment in a case finding what appears to amount to fraudulent misrepresentation in relation to the billing of about $69,000 (reduced on a ‘but say’ basis to about $64,000) in a personal injuries case where liability was admitted before Keddies got in the harness, and where the proper charge was about $21,000.  Justinian‘s Richard Ackland has the background and latest here.

The partnership apparently bungled the settlement of a taxation allowing the claim to slip through to judgment, and Judge Curtis of the NSW District Court ended up ordering Keddies to repay to the client the difference between what they charged and what they were entitled to charge.  The reasons provide food for thought for those out of time to commence taxation because the judge found that the bills had within them implied representations that the amounts billed were properly chargeable at law.  He reduced the fees chargeable by Keddies to the amount in fact properly chargeable at law, something which would ordinarily be achieved in a taxation.  Such logic might be employed in many cases in the 5 years after a bill during which the client is out of time for taxation but within the 6 year limitation period for prosecuting a misleading and deceptive conduct claim.

The case will be seized on by opponents of hourly billing, and perhaps properly so (the first 6 minutes or part thereof charged for sending a pro forma welcome letter which required only the insertion of the client’s name is an example of why minimum charges of 6 minutes are abhorrent when applied literally, for example).  But it really appears to be a case about simple dishonesty (by whom is not made clear), because in the main this was not a case where the clients were billed outrageously albeit according to the terms of a contractual agreement which bound them.  I say that because if there was any innocent explanation advanced by the Keddies partners for the conduct the most obvious explanation for which was someone’s dishonesty, it was not recorded in the judgment.  This was a case where, in the main, work was charged for which was not done (most likely as in the case of the second 6 minutes or part thereof billed for the welcome letter), or not done by a person whose contractually agreed rate warranted the charge for the time spent.  For example:

  • A secretary was impermissibly charged at partners’ rates ($460 per hour).
  • One hour’s work was charged on 4 October 2005 for drafting the costs agreement which had been signed on 30 September 2005, and an associated explanatory document at  senior litigation lawyer rates, when in fact all that was required was the insertion of the client’s name.  The Court held that the rate which would have been properly chargeable under the costs agreement had that been the appropriate method of billing was 6 minutes of a secretary’s time at secretaries’ rates. No argument appears to have been advanced that this was not work done for the client, but the lawyers’ own costs of entering into a contract to which they were a party and which they wished to propose the terms of.  There is no record of any evidence having been given that the time entry was a mistake, and it is hard to see how the recording of time beyond (at most) one block of 6 minutes or part thereof could have been anything other than outright dishonesty on at least someone’s part within Keddies, even if this activity was properly taken to be work engaged in by the solicitors on the client’s behalf.
  • A charge for two blocks of 6 minutes or part thereof was charged at the secretaries’ rate for reading a letter advising the time, date and place of a medical appointment, a further charge of two such blocks for ‘considering’ that letter, and a further charge of two such blocks for advising the plaintiff by letter of that information.  The total bill for work which it is hard to see taking 5 minutes of a secretary’s time was $108 (for which incidentally, just to keep this real, you can currently have a linguine with fresh sardines, pine nuts, currants and saffron, a gravlax, three glasses of Italian prosecco, a chocolate pudding with peanut butter ice cream and a strawberry mousse with jelly and meringues at Gill’s Diner).
  • The plaintiff was charged $184 (4 blocks of 6 minutes or part thereof at partner rates) for reading, then considering, a letter which said ‘We enclose authority for execution by your client to enable us to obtain documentation from the Department of Immigration and multicultural and indigenous affairs.  Please have your client sign the authority and returned to us as soon as possible.’
  • The plaintiff was charged $131 (3 blocks of 6 minutes or part thereof at partner rates) for reading an email the non-formal parts of which read ‘Rcv’d’.  (What a freaking joke!) She was charged the same amount for reading the email to which that was a reply, the non-formal part of which read ‘I refer to our telephone call this morning.  I have been directed by Assessor J Snell, to inform CARS: 1.  The CARS hearing date on 14 September 2005 has been vacated — please cancel the interpreter arranged by CARS. The CARS hearing date has been rebooked for 17 November 2006 at 10 am — please rebook a Mandarin interpreter.’

It will be interesting to see the response of the police, the NSW Legal Services Commissioner and the Council of the NSW Law Society to the judgment, especially in light of the fact that the plaintiff’s complaint to the Commissioner was officially withdrawn, a fact which did not of course prevent the Commissioner from continuing to investigate it: s. 512 Legal Profession Act 2004 (NSW).  Somewhat surprisingly, I learn from that section, that the withdrawal of the complaint also does not prevent the complainant from re-lodging it: sub-s. (5). Continue reading “The Keddies overcharging civil case no. 1”

Solicitors’ exposure to falling between two stools in solicitor-client taxations revealed

Update, 16.2.12: See now Ipex ITG Pty Ltd v McGarvie [2011] VSC 675.

Original post: A recent decision of the Supreme Court’s Costs Court means that solicitors have only a non-extendable 60 days in which to seek taxation of counsel’s fees, even though clients and third party payers have an extendable 12 months in which to seek taxation of the solicitors’ fees, including disbursements such as counsel’s fees: Kong v Henty Jepson & Kelly Pty Ltd, unreported, Associate Justice Wood, 4 April 2011.  The same result was reached in I.J.R. Homes v MDM Legal Services SCI, unreported, Associate Justice Wood, 12 September 2011, and the Costs Judge’s comments in that order are reproduced at the end of this post too.  Unless the barrister may be joined to and bound as against the solicitor to the outcome of the taxation of the solicitors’ fees initiated after the expiry of the time allowed to the solicitor for seeking taxation of the counsel’s fees, the solicitors run the risk of the client being liable to them only for the taxed down amount of counsel’s fees while the solicitors remain liable to the barrister for the full whack.

And the solicitor cannot get around the problem by seeking to procure their client to seek taxation of the counsel’s fees directly against counsel, because, the Supreme Court says, clients have no standing to do so.  Though the Court has a discretion under s. 3.4.42 to join ‘concerned law practices’ and order that they be bound by the outcome, it did not make such orders in the Kong Case joining the barrister, though for reasons peculiar to that case, the Court’s reluctance to do so may not be as great in future. All of that applies where the traditional relations between client, solicitor and counsel are entered into; where the client has a costs agreement with the barrister, things are different, and less problematic for solicitors.

But for the fact that solicitors tend to disregard the law of costs and carry on as they always have, no matter what the law is and how it is changed, four reactions might be expected in Victoria and the many other states with analogous statutory provisions:

1.   Solicitors will commence prophylactic applications for taxation of counsel’s fees within 60 days after service on them of the fee slip, in case the client later seeks to tax the solicitors’ bills (but they may well have to pay the costs of doing so out of their own pockets);

2.  Solicitors will require counsel to contract directly with clients in relation to fees, which many counsel will not be prepared to do;

3.  Solicitors might seek to contract out of clients’ rights to review counsel’s fees as disbursements on their bills, or to contract out of their rights to review counsel’s fees as disbursements on their bills, once their right to seek review of counsel’s fees has expired, but that is likely to be effective only where the clients and third party payers are ‘sophisticated’ within the s. 3.4.2 meaning of that term, since agreements about costs which purport to contract out of normal (as opposed to ‘sophisticated’) clients’ and/or third party payers’ rights to taxation are void: see ss. 3.4.26(5) and 3.4.31; or

4.  Solicitors might make it a term of their costs agreement with counsel that counsel indemnify the solicitors against any difference between the amount paid by the solicitors to the barrister and the amount payable by the client to the solicitors in respect of those same fees, but any such agreement would have to have a degree of sophistication, to avoid counsel taking the rap for a solicitor’s default (such as where counsel provide adequate information for the solicitor to provide disclosure of counsel’s fees to the client, but the solicitor fails to do so, with the result that the solicitor’s taxed costs, including disbursements such as counsel’s fees, are reduced under s. 3.4.17(4).

How are similar problems treated in other states’ and territories’ taxing and review jurisdictions?

Continue reading “Solicitors’ exposure to falling between two stools in solicitor-client taxations revealed”

Client joy to abound in draft national profession legislation’s costs provisions

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:

  1. 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);
  2. 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
  3. 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”

Misconduct and Costs

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.

More on the indemnity principle

Up in NSW, the system of reviewing legal costs is very different from here in Victoria.  It is done on the papers by non-judges.  As District Court Judge Peter Johnstone said in Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2011] NSWDC 55:

‘the costs assessment process is a statutory process that is neither wholly judicial, nor wholly adversarial, as there are strong elements of an inquisitorial nature involved. These features of the process are important to understand when evaluating decisions as to a matter of law made in the course of the assessment.’

A costs assessor was assessing the party party costs payable by one party to a more successful party in litigation.  He satisifed himself that the indemnity principle was not breached by perusing the costs agreement which regulated the solicitor-client costs payable by the more successful party to its own lawyers, and was ‘satisfied that the amount claimed by the costs applicant is no greater than the amount for which the costs applicant would be liable pursuant to those agreements’.

Judge Johnstone said, applying Shaw v Yarranova Pty Ltd [2011] VSCA 55, that a costs assessor need not take evidence of the actual amount charged by the more successful party’s lawyers in every case, but must do so when there is evidence casting doubt on the proposition that the claim for party party costs was no greater in total — not per item — than the solicitor-client costs.  Here there was sufficient evidence to cast such doubt, and the costs assessor was wrong not to have insisted on evidence as to the amount payable on a solicitor-client basis.

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”

Problems abound when one spouse’s solicitor conveys matrimonial property by order of the Court

Update, 6 June 2011: A reader has helpfully pointed out that the decision digested below has been overturned by a unanimous Court of Appeal, the principal judgment having been given by Justice McMurdo.  See Legal Services Commissioner v Wright [2010] QCA 321.

Original post: The Family Court likes to order that one spouse’s solicitor act for both spouses in the conveyance of matrimonial property which it orders be sold.  That this may occur exemplifies the principle that it is not enough that clients’ interests conflict for a conflict of duties to proscribe a multiple client retainer; what is necessary is that they conflict materially in relation to the matter which is the subject of the retainer.  But I have acted in three matters where such an order has resulted in problems, and that suggests to me that there are many more such matters which have run into problems.  Generally, the problems arise from the solicitor ignoring in some way the interests of the spouse for whom he or she had previously been acting exclusively, or at least the perception that that is so.

Legal Services Commissioner v Wright [2010] QSC 168 is a variation on the theme.  It arose out of a de facto property adjustment case in Queensland’s District Court.  The Court ordered that the de facto husband’s solicitor ‘will act on [his] behalf in the conveyance of the sale of the property’, which was in the de facto husband’s name.  The de facto husband and wife were then ordered to cooperate in paying out costs of the sale (including the legal fees) and creditors before the balance was to be divided 75% to the de facto wife and 25% to the de facto husband.  The Chief Justice of Queensland wasted little ink in concluding that the wife was neither the solicitor’s client nor a third party payer, and so was not even entitled to an itemised bill when the husband’s solicitor charged over $7,000 for the conveyance, directly diminishing the amount reaching her pocket by three-quarters of $7,000.

Where one spouse agrees on the other spouse’s solicitor conducting a conveyance otherwise than expressly for both of them, this case suggests that they would be well advised either to provide for an obligation to pay the solicitor’s fees of a kind which brings them within the definition of ‘third party payer’, or fix the fee payable for the conveyance, or contract for an entitlement to an itemised bill, and thereafter to be deemed by agreement to be a third party payer. Continue reading “Problems abound when one spouse’s solicitor conveys matrimonial property by order of the Court”

The limits on Kuek v Devflan articulated

The Court of Appeal has had the opportunity promptly to provide a decision illustrating the limits of its previous decision in Kuek v Devflan Pty Ltd [2011] VSCA 25, which I posted about here.  The opportunity arose in Shaw v Yarranova Pty Ltd [2011] VSCA 55, a unanimous decision of Justices of Appeal Redlich and Mandie.  A third party payer was principally responsible for the fees of the victorious litigant.  The vanquished litigant sought to avoid the adverse costs order by invoking the indemnity principle of legal costing by establishing that the victorious litigant had no obligation to pay its lawyers.  The Court of Appeal said that the law presumes that there is an obligation on the client to pay its lawyers even if there is evidence of an obligation on a third party to pay the lawyers as well.  It made clear that it would not sanction fishing expeditions to displace the presumption.  Here, the litigant’s parent company, which was the third party payer, did not have a costs agreement with the lawyers and neither did the litigant.  But unless lawyers agree to do work for a client for free, they are entitled to payment on scale even in the absence of a costs agreement. Continue reading “The limits on Kuek v Devflan articulated”

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”

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?”

New cases

Legal Services Commissioner v Dempsey [2010] QCA 197 is an unsuccessful appeal from a disciplinary prosecution in which findings of dishonesty were made.

Dye v Fisher Cartwright Berriman Pty Ltd [2010] NSWSC 895 is a case in which an application for a costs assessment (NSW version of taxation) outside the allotted 12 month period succeeded.

Young v Masselos & Co [2010] NSWDC 169 is one of those cases where a solicitor negligently let a limitation period go by and damages had to be assessed based on the plaintiff’s prospects of winning the case foregone.

Council of the Law Society of New South Wales v Harrison [2010] NSWADT 201 is a decision about the Law Society’s successful application to amend a charge against the respondent solicitor.  It reviews a lot of NSW law about the requirements for pleading disciplinary charges, and considers the application of Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 to disciplinary hearings.


Solicitors’ retainers have implied term of efficiency

In Michaels v Daley [2010] 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.

An application to tax costs out of time

Ciaglia v Beilby Poulden Costello Pty Ltd [2010] NSWSC 748 is a decision of Justice McCallum. A client sacked his lawyers.  They sent a bill for about $30,000.  Through his new lawyers he did a deal with the old lawyers: in exchange for the delivery to his new lawyers of the old lawyers’ file, he would pay the disbursements component of the bill (about $5,000) and give the new lawyers an irrevocable authority to pay the outstanding $25,000 or so from the proceeds of the proceedings in which the old lawyers had acted.  He had amended the authority proposed by the old lawyers so as to substitute for the irrevocable authority in relation to the proceeds of any proceedings against the person he was suing an irrevocable authority only in relation to the proceeds of the particular proceeding against that person in which he was then engaged.  In dicta, her Honour suggested that at this point, the client had probably ‘waived’ his right to a taxation.  But that was to change. Continue reading “An application to tax costs out of time”

The 20% reduction in Worksafe case costs: what does it mean?

Section 134AB(29) of the Accident Compensation Act, 1985 means if injured workers win in proceedings under that Act, they get 20% less from the losing party towards the amount they have actually been charged by their lawyers than all other litigants. In Joaquim v FPI Vinyl Compounds Pty Ltd, Supreme Court of Victoria, unreported, 9 July 2010, Costs Judge Wood held that the provision means that whatever the taxed costs are, 20% is deducted.  It was argued by the losing party that the 20% deduction should apply only to scale items allowed as per the scale allowance, and not to items which were already allowed in the discretion granted by the preamble to the County Court scale in an amount less than provided for by the scale.  The provision says:

‘For the purposes of the taxing of costs in proceedings to which this section applies, any applicable scale of costs has effect as if amounts in the scale were reduced by 20%.’

Let me know if you would like a copy of the decision.

Applications to waive fees are not party party costs

In Joaquim v FPI Vinyl Compounds Pty Ltd, unreported, Supreme Court of Victoria, 9 July 2010, Costs Judge Wood held that solicitors’ assistance to poor clients in applying for waivers of court fees (filing fees, setting down fees and hearing fees in this case) are not fees which are properly claimed in a party-party bill of costs.  Clients are perfectly capable of filling them in themselves, his Honour held, and if the solicitor does it for them, it’s not something the other side should have to pay for if they lose.  This is an example of work done and billed for by the solicitor which may be allowed on a solicitor-client taxation, but not on a party party taxation.  That is, it is an illustration of the difference between solicitor-client and party-party costs.

Let me know if you would like a copy of the decision.

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.

Orders for discovery in SA taxations

Here is a new decision from South Australia about the availability of discovery in a taxation of costs: Steicke v Donaldson Walsh Lawyers [2010] SASC 188.  Apparently, there is a big divorce case going on in which the wife has paid over $10 million in legal fees and the husband over $20 million.