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:

‘The rapaciousness in respect of fees of Dickens’ character, the chancery lawyer, Mr Vholes in respect of Jarndyce v Jarndyce, the fictional case in the Court of Chancery, is a feature of his novel, “Bleak House”. The views of Dickens and other authors on the legal profession were the subject of an illuminating lecture delivered in 1910 by Thomas Alexander Fyfe, Sherriff-Substitute (a Scottish judicial office, also termed Sherriff Depute, the holder of which exercises a jurisdiction similar to that of an Australian District or County Court judge) at Glasgow, to the Glasgow Dickens Society and shortly thereafter reproduced by him in book form as, “Charles Dickens and the Law”, William Hodge and Company, Glasgow, 1910 (text available online at The Internet Archive, http://www.archive.org/stream/ charlesdickensla00fyfeuoft/charlesdickensla00fyfeuoft_djvu.txt).

…

Mr Bloom’s assessment is premised on an uncritical assumption that, on a party and party taxation, a taxing officer would be disposed to exercise his or her discretion to allow costs on a time charging basis and that this assumption should carry over into the fixing of costs in gross.

Cautionary, if not deprecatory statements with respect to the practice of time charging by counsel and solicitors are both legion and not confined to the present generation of the judiciary.

In Magna Alloys & Research Pty Ltd v Coffee (No 2) [1982] VicRp 10; [1982] VR 97 at 112, Fullagar J stated:

The time honoured basis of charging counsel’s fees in respect of a court hearing remains the basis of a brief fee and refreshers of two-thirds of that fee, and prima facie this is the basis upon which counsel’s fees will be taxed as between party and party. There must, in my opinion, be an onus upon the party who seeks a departure on taxation from that traditional and usual basis, and the onus must be one of satisfying the taxing officer that the traditional method of fee marking could not reasonably have been followed in all the circumstances of the case. …

It might be perfectly reasonable for the solicitor to place himself and the lay client in the hands of counsel as to how long a preparation is in fact undertaken, but it is quite a different thing to say that the taxing master should allow against the other side on party and party taxation an amount arrived at by accepting, in addition to the propriety and correctness of the daily rate, the times said by counsel to have been worked by him as being (a) correct in fact and (b) necessary or proper to be worked. Even further removed from the customary checks and balances is the situation where, after the case is over, or after the pre-trial preparation is over or nearly over, counsel simply charges his “usual” daily fee multiplied by the time he says he has spent, without any agreement in advance by the solicitor. It is one thing to contend that counsel and the instructing solicitor may trust each other as gentlemen (as to which I say nothing because solicitors and counsel have their own respective rules of ethics), but it is in my opinion quite another thing to say that the litigant on the other side must be bound to pay on the footing that the aggregate charged was necessary or proper to be incurred.

A decade later, in Lumley Life Limited v IOOF of Victoria Friendly Society (unreported, Lockhart J, 23 April 1992), Lockhart J, without commenting on the practice, referred to a “modern tendency” for counsel to charge fees on a daily rate basis for both appearance and preparation work, although he allowed that it was within the discretion of a taxing officer to tax a bill on a fee on brief basis in respect of counsel’s fees.

In 1985, Sir Harry Gibbs, when giving, as Chief Justice, his speech, “The State of the Australian Judicature” (1985) 59 ALJ 522 at 526 observed:

Where undue cost is caused simply by the unnecessary length of litigation, greater efficiency will provide the remedy… I have the impression that in some cases the fees charged by counsel – particularly by those who are not the most eminent – are disproportionately high. The practice of some counsel of charging for the time spent in preparation would seem to put a premium on that inefficiency.

In respect of counsel’s fees rendered on a time charging basis the High Court’s then Principal Registrar, Mr F Jones, had occasion shortly thereafter to consider that practice when taxing a bill of costs in respect of an appeal to that court: Commissioner of Taxation v Gulland in “Registrar lays down restrictive tests for taxing costs” [1985] HCA 83; (1985) 160 CLR 55; [1986] 7 Leg Rep 1 (Gulland). It is evident from his reasons that Registrar Jones shared with his Chief Justice a concern in relation to the premium on inefficiency which can attend time charging. He made the following observations:

I do not accept the submission on behalf of the applicants that the time cost method of assessing as the most accurate method of ascertaining the work done by counsel in preparing an appeal to the High Court. Charging by time, in my opinion, favours the inexperienced counsel [over the experienced counsel] who is familiar with the principles involved in the matter and accordingly can prepare it in less time and at less cost to the client and the unsuccessful party. (at p 2)

Rejecting the submission that, as a matter of discretion, fees rendered by counsel on a time charging basis should be allowed, he declined to depart from the traditional position of allowing only a fee on brief, refreshers where appropriate and such conferences which were necessary or proper in the circumstances of the case. He stated (at p 3), “No prudent man would have approved the time cost method of charging; he would have expected counsel to have charged a brief fee appropriate to the nature of the case”. The registrar also discussed the nature of brief fees on page 3: “As a general rule, the brief fee contains an element of preparation and traditionally this has included a substantial part of the day before the hearing. For additional preparation fees to be allowed, a matter … must involve matters of great complexity or voluminous documentation”. In the circumstances of that case the registrar allowed an amount equivalent to a refresher account for additional preparation time. The registrar was also prepared to allow such conferences with solicitors as were necessary and proper in the circumstances of the particular case.

Gulland, it might be recalled, was one of a trilogy of cases which marked the last of the cases in the High court concerning the operation and application of the former s 260 of the Income Tax Assessment Act 1936 (Cth), once that Act’s principal, general anti-avoidance provision. The bill of costs concerned did not, of course, relate to a trial, but the legal issues in that case were markedly more complex than those in the present.

Even if one compares the pre-trial preparation period which commended itself to Mr Bloom as likely to be allowed on a party and party basis (14 to 16 days) with the periods of preparation which actually appear in counsel’s fee notes the difference is stark. Of course that is a difference between a period which is regarded by him as reasonable to allow on a party and party taxation and one which might perhaps be allowed on a solicitor and client based taxation but, even allowing for that, the difference remains stark. In my respectful opinion, that difference is one way of highlighting why no prudent person would agree to an open-ended time charging arrangement in respect of counsel’s fees. Seemingly though, that is what occurred in the present case.

More than a quarter century may have passed since Fullagar J in Magna Alloys & Research Pty Ltd v Coffee (No 2) and Registrar Jones in Gulland voiced the above sentiments in respect of time charged counsel’s fees and applied in lieu the “time honoured” fee on brief approach when taxing a bill of costs but they remain relevant to this day; indeed even more so for the practice is, if anything, more pervasive in the legal profession than then, much and more than the “modern tendency” noted by Lockhart J in 1992 in Lumley Life Limited v IOOF of Victoria Friendly Society. These days, so prevalent is the practice that those who have commenced a legal professional career as a solicitor and later come to practise at the Bar may have encountered no other method of charging for professional services than time charging. The adoption as counsel of such a method for the rendering of fees will in such circumstances seem only natural.’