Applications to extend time to tax lawyers’ bills: keep ’em tight

Many disputes about costs are still governed by the Legal Profession Act 2004.  It specified as the time in which to seek taxation a period of 12 months.  Where a bill is given, the 12 month period starts from the date of service of the bill.  But since Collection Point Pty Ltd v Cornwalls Lawyers Pty Ltd [2012] VSC 492, it is clear that clients have until 12 months after the service of the final bill in any particular matter to seek taxation of any previous bill.  Of course what is the final bill in the same matter is a difficult question.  What is clear is that one costs agreement may govern several matters.

Applications to extend time must be made to a Justice of the Supreme Court (as opposed to any decision maker in the Costs Court or any Associate Justice) under s. 3.4.38(6).  The law is well-summarised by John Dixon J in Rohowskyj v S Tomyn & Co [2015] VSC 511, and his Honour’s guidance about the nature of an extension of time application is useful and prone to be overlooked:

‘Judging the merits of an application ordinarily involves no more than consideration of an ‘outline of the case’, by reference to limited materials. Further, it would be inappropriate to put extensive materials on a procedural application to address issues of complexity and substance’.

Leave to cross-examine is necessary, and not usual.  It seems to me in general, and reinforced by Justice Dixon’s caution, that such leave is much more likely to be granted if there are disputes in relation to factual matters which go to the core questions to be determined in such an application (the length of the delay and the extent to which the delay has given rise to prejudice to the lawyer and the reasons for the delay) than to matters which would be the subject of enquiry in a taxation proper (e.g. how serious was non-disclosure, and did the lawyer do a bad job, or bill otherwise than in accordance with the parties’ agreement).  If it were necessary to seek leave to cross-examine, it might be wise to seek leave only in relation to those core issues.

It seems likely that these applications are interlocutory (c.f. Scanlon v American Cigarette Company (Overseas) Pty Ltd (No 1) [1987] VR 261), so that certain kinds of hearsay evidence may be adduced: s. 75 Evidence Act 2008.

I argued such an application the other day.  The applicant’s farrago (I wanted to use the word ‘salmagundi’, pictured, but restrained myself) of complaints all of which related to non-compliances with the Act which had no real effect on how much the client should pay the lawyer suggested, I said, that the Costs Court was not an appropriate forum for their determination, and that to the extent that it was, the taxation would be plagued by irrelevant and petty carping in a manner likely to give rise to costs disproportionate to the comparatively little in dispute. I cited Justice Bell’s recent decision which emphasised the narrowness of the Costs Court’s jurisdiction: Owerhall v Bolton & Swan [2015] VSC 417 (esp at [7]).

I observed that Justice Emerton had declined an application for similar reasons in Tomasevic v Nowicki Carbone [2015] VSC 302 at [25] and [28] where her Honour said:

‘there is a real argument that it would not be fair and just to subject the lawyers in question to a costs review that the applicant may seek to divert into a broad-ranging inquiry into the conduct of his lawyers.’

These sentiments have been reiterated in the latest decision in such an application, Iloski v Boutique Lawyers Pty Ltd [2016] VSC 349 where Justice Terry Forrest said at [12]:

‘The ambit of the dispute between the two parties is far wider than the mere quantum of the invoiced amount. It involves allegations of forgery, negligence, mysterious unauthorised deposits in the respondent’s trust account, and other misconduct.  It is entirely inappropriate, in my view, for the Costs Court to be used as a vehicle to ventilate such wide ranging allegations.’

In my case, the Court considered the proportionality principle to be of overwhelming significance and ordered the parties to mediation before Associate Justice Efthim (one of the land’s best mediators) who did the trick and settled the dispute.  But before doing so, the Court did advise a preliminary view.  I had argued that there was no real problem with the fees, and no real attempt by the applicant to establish any prima facie case of over-charging, but there may have been some non-disclosures.  What the applicant was really seeking to do was extract a better outcome by using the forensic advantages available to the victims of disclosure defaults (e.g. a presumption that the lawyer will pay the costs of the taxation: s. 3.4.45(2)(b), and a s. 3.4.17(4) reduction from taxed costs proportionate to the seriousness of the non-disclosure) in circumstances where those disclosure defaults were, in the context of the relationship of solicitor and client, of no moment.

Without having heard full oral argument, the Court advised the parties of a preliminary view which was nuanced and creative: leave would be granted on terms, and the terms would include that the applicant not seek to avail himself of any disclosure default in the taxation.  Those were fancy rights, I infer the thinking went, which the applicant could have availed himself of in a timely fashion and rights which the applicant had not convinced the Court were in fact particularly germane in the context of the parties’ relationship, but not rights which it was appropriate for the applicant to agitate far out of time, after the fees had long ago been paid. The Court made clear that this would mean that costs would follow the event of the taxation.  The applicant was, tellingly, not enthusiastic about this course at all, and, as I said, the matter quickly settled.


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