Two costs disclosure default cases in VCAT

In retainers governed by the Legal Profession Act, 2004, failures to disclose matters which the Act requires to be disclosed about future legal costs can have the result that the solicitors may not recover their fees whether by proceedings or otherwise until they have been the subject of a solicitor-client taxation in the Supreme Court, generally at the solicitors’ expense regardless of who ‘wins’ the taxation (i.e. regardless of whether the Supreme Court affirms the solicitors’ bill or substantially discounts it). The draconian provision which says so, s. 3.4.17, and the provision which says one of the things non-disclosure of will trigger s. 3.4.17 is a change to the original estimate (s. 3.4.16) are set out at the end of this post.

In the first case, a file handler changed firms. The new firm did not reiterate the old firm’s estimate of fees and they were told to go off and have a Supreme Court taxation over a bill for $2,500 before coming back and continuing their proceeding. Unless the solicitor is found not to be entitled to any fees, a Supreme Court taxation ends with a Supreme Court order to the client to pay the amount found to be appropriate. The solicitor would presumably go back to the Tribunal only if there were defences which the Taxing Master did not have power to deal with and which VCAT’s Legal Practice List would.

In the second, the failure of a solicitor to update his fee estimate for the first 10 days of a retainer in which the original estimate blew out by over 50%, was found not to have breached s. 3.4.16 because in the context of the retainer over 10 days, it was not reasonably practicable to give the update. The decision must mean that there is no absolute duty on a solicitor to keep track of costs as they are accruing and to advise the client when the original estimate is exceeded.

In JDRL Pty Ltd v Vintrix International Pty Ltd [2008] VCAT 985, the applicant solicitors sued for their fees of $2,500 or so. The matter had come into the firm with an employee solicitor who continued to work on the file. At his old firm he had given an estimate of fees, but the new firm had not confirmed that estimate. Without giving reasons, Member Butcher indicated that it was ‘clear’ to him that there had been a breach by the applicant of the Legal Profession Act, 2004‘s s. 3.4.9’s obligation to give an estimate of the total costs of the matter, with the result that s. 3.4.17 meant that the proceedings could not be maintained by the solicitors until their costs had been taxed by the Supreme Court’s Taxing Master in a solicitor-client taxation (at the solicitors’ expense). Since the client company can be represented in the Supreme Court only through a lawyer, and since the party party costs of a Supreme Court taxation, even of a small bill are no doubt at least $2,500, one imagines that this ruling effectively means that the solicitors will not be paid for the work they did. It is a harsh law. Though the proceedings were instituted in breach of s. 3.4.17, Member Butcher obviously concluded that VCAT had jurisdiction, and stayed rather than dismissed the applications pending the taxation.

CS Pty Ltd v Yu [2008] VCAT 984 was another suit for fees by a solicitor under the Fair Trading Act, 1999. The Yus were migration agents in a partnership dispute. The former partner was suing them for about $70,000 in the Magistrates’ Court. The Yus initially represented themselves, and only retained the solicitors on a Friday before an application to strike out their defence in two Mondays’ time. The solicitors estimated the fees for resisting the application and prosecuting an application by the Yus to lodge a counterclaim. On the first Monday, the solicitors estimated total costs at $2,200. In the end, the costs were about $3,350, more than one and a half times the estimate. The Yus sought to rely on the solicitors’ failure to update their estimate even when it had been substantially exceeded, a breach of s. 3.4.16 which, had it been made out, would have triggered s. 3.4.17, and given rise to the same result as in the first case. The estimate remained unvaried from the first Monday until the on which the The solicitors had forgotten to enter into a costs agreement. They had given the fee disclosures but there was no offer to enter into a retainer on that basis which was accepted by the clients. The result was that they were entitled to recover their fees only on Magistrates’ Court scale, but Senior Member Howell took an expeditious and pragmatic approach, saying:

’27 I could require [the solicitors] to prepare an itemised bill of costs calculated on the Magistrates’ Court scale. I am not prepared to take that step in an application involving a relatively small amount of money, where there have been on different days a hearing, an application for a re-hearing, and a re-hearing. Because I am satisfied that the cost of the work performed by [the solicitors], if calculated on the Magistrates’ Court scale, would be about the same as the costs charged in the tax invoices, I will simply order that Mr. Yu & Ms Yu pay the amount claimed in the application and interest thereon.’

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