Supreme Court flexes inherent jurisdiction of its own motion to require both parties’ lawyers’ costs to be taxed by the Costs Court on Scale

Pity the dozy lawyer who wanders innocently into Justice Cate McMillan’s court, bringing attitudes from days of yore about fees charged out of a great big fund.  Re Jabe; Kennedy v Schwarz [2021] VSC 106 should in my opinion be reported in the Victorian Reports as indicative of the breadth of and resilience to statutory incursion of the Court’s inherent jurisdiction.  The Court of its own motion sent both parties’ lawyers’ costs off to the Costs Court to be taxed on Scale, at the conclusion of a case, having found, on an inquiry initiated by Justice McMillan, disclosure defaults and void costs agreements governed by the Legal Profession Uniform Law, and legal costs that were not fair, reasonable and proportionate as required by that Law and the Civil Procedure Act 2010.

A woman wrote her daughter out of her will because, she said, her daughter had ‘deemed it appropriate not to have contact with her for the twenty years prior to the will’, leaving the bulk of her estate of a third of a million dollars to the receptionist at her doctor’s and the law clerk at her solicitor’s.  The law clerk and her boss were the named executors and they engaged the firm where they worked, Spigler & Schwarz, to act as their solicitors.

The daughter retained Goodman Group Lawyers and she brought a testators family maintenance claim in the Supreme Court.  Six months later, she got a settlement of $100,000 inclusive of costs at a mediation.  For doing not very much (‘the only substantive work was a nine-page position statement for the purposes of the mediation’, Goodman Group Lawyers said their costs were $62,170 reduced out of the goodness of their hearts to $50,000.

The Court raised concerns of its own motion about the reasonableness and proportionality of the costs under the Civil Procedure Act 2010 and the Legal Profession Uniform Law and enquired about disclosure.

Submissions in response disclosed that Goodman Group had proposed a fixed fee of $55,000 plus unspecified disbursements to the end of mediation.  Spigler & Schwarz had estimated their costs for ‘the litigation matter’ to be $5,000 inclusive of disbursements at $440 and $660 per hour, but later said in writing that this referred only to probate.  At the commencement of the proceeding Spigler & Schwarz gave an oral disclosure to the receptionist and the law clerk that costs of the proceeding might be $35,000, without any specification of how legal costs would be calculated for the TFM claim.

Spigler & Schwarz managed to charge themselves $32,450 in professional costs, incurring total costs of $46,270.  The Court described the work they did at [86]:

‘It prepared the notice of appearance, a short formal affidavit on costs and possibly the position paper. It appeared at the mediation with counsel representing the executors of the estate.’

They conceded the absence of writing was a breach, and so the Court promptly declared any costs agreement void. The fact that Mr Schwarz as principal of the firm would be giving disclosure to himself and his law clerk as executors made it more important, not less important, that proper processes be followed, McMillan J said at [77].  The firm seems not to have convinced her that all of the beneficiaries gave informed consent to Mr Schwarz as executor being remunerated, contrary to s. 65C of the Administration and Probate Act 1958.  Then for good measure, her Honour found Spigler & Schwarz’s costs to be ‘not fair, reasonable or proportionate’, noting that the law clerk was charging about the same per hour ($440) as that allowed for attendances requiring the exercise of legal skill or knowledge under the Scale ($453) and Mr Schwarz considerably more than that ($660).

Everyone except the Court said it was very complicated and very important to the parties and very, very proportionate, fair and reasonable.  McMillan J found that it was ‘not complex’ and indeed ‘relatively straightforward’ that Goodman Group Lawyers would have known from the outset that the proceeding would involve little substantive work for them.

Things did not go well for the lawyers.  In a most elegant judgment, McMillan J invoked that aspect of the Court’s inherent jurisdiction which supervises the conduct of its officers such as solicitors at [44] – [46], reproduced below.

She found Goodman Group Lawyers’ costs agreement void because of disclosure defaults which included a failure to give an estimate which included disbursements such as the mediator’s fees and, probably, counsel’s fees, and a failure to give updated disclosure once it became apparent that fees might exceed the initial estimate.

Furthermore, at [70] – [71], her Honour declined to enforce Goodman Group Lawyers’ costs agreement, by reference to authority about the scepticism with which courts regard generous costs agreements, emboldened by the breach of the Uniform Law requirement in s. 174(3) of the Uniform Law to ‘take all reasonable steps to ensure that the client understood and consented to to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs’:

’70. At general law, there is no doubt that a client, fully informed and advised, can agree to pay what might otherwise be an unreasonable fee.  However, in the case of solicitor–client remuneration agreements, which are subject to the inherent and general jurisdiction of the Court, the Court may nevertheless concern itself with quantification of solicitor–client costs.[8]  The Court is hesitant to enforce these where they are favourable to the solicitor unless made in circumstances that preclude any suspicion of an improper attempt on the solicitor’s part to benefit himself at his client’s expense.[9]

[8]          Pryles & Defteros (n 2) [22]–[23] (Parker J).

[9]          Clare v Joseph (n 5) 376 (Fletcher Moulton LJ).

71. GGL has not produced a satisfactory explanation as to the steps it took to satisfy itself that the plaintiff had understood and given consent to its substantial proposed costs.’

Her Honour used her inherent jurisdiction to refer the costs of the parties to the Costs Court to be taxed in each case as between solicitor and own client against the Supreme Court Scale, being the basis she considered to be fair and reasonable in the circumstances.

Here is the passage about the Court’s inherent jurisdiction which I promised earlier:

’44. The Court has inherent and general jurisdiction to ensure that legal practitioners as officers of the Court are remunerated properly.[2]  This includes jurisdiction to ensure legal practitioners are paid no more than what is fair and reasonable.[3]

[2]          Pryles & Defteros (a firm) v Green [1999] 20 WAR 541, [22]–[23] (Parker J) (‘Pryles & Defteros’), citing Harrison v Tew [1989] 1 QB 307, 320 (Dillon LJ); Electrical Trades Union v Tarlo [1964] 1 Ch 720, 723–4 (Wilberforce J); Sutton v Sears [1960] 2 QB 97, 102 (obiter dictum of McNair J).

[3]          Ibid.

45. The inherent jurisdiction of the Court precludes overcharging even in situations where the excessive charges were agreed as a matter of private contract.[4]  According to Fletcher Moulton LJ in Clare v Joseph[5] the Courts have viewed agreements between individuals and their legal advisers as to the latter’s remuneration with a ‘great jealousy’ due to the risk of circumstances in which solicitors may improperly attempt to benefit themselves at the expense of their clients.

[4]          Pryles & Defteros (n 2) [24] (Parker J).

[5]          [1907] 2 KB 369, 376 (Fletcher Moulton LJ).

46. The statutory scheme set out in the LPUL should be seen as complementary to the inherent jurisdiction of the Court.[6]  Section 172(1) of the LPUL provides that a law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that are in particular:

(a)   proportionately and reasonably incurred; and

(b)  proportionate and reasonable in amount.

[6]          Pryles & Defteros (n 2) [24] (Parker J).’

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