The Supreme Courts’ inherent supervisory jurisdiction (lawyers’ fees) Part 6

6. Illustrations in the Costs Space

In this section of the paper, some recent cases in which the inherent or analogous implied jurisdiction has been resorted to are considered in detail.

Re Jabe (2021)

Re Jabe; Kennedy v Schwarcz [2021] VSC 106 is a decision of Justice McMillan in the course of considering whether to approve the settlement of a testators family maintenance claim.[1] It was cited with approval in Hartnett v Bell [2023] NSWCA 244 at [123].

The parties’ solicitors had charged their clients $50,000 and $46,270 respectively in a dispute about an estate worth about $325,000. The Court was asked to approve a settlement under which the claimant would receive $100,000 inclusive of his costs out of the estate.

Expressly in the exercise of its inherent supervisory jurisdiction over its officers, the Court raised of its own motion concerns about the parties’ costs and ‘enquired whether’ they would take the opportunity to make submissions in relation to specific matters, such as whether their solicitors’ costs disclosures were void for non-disclosure. Each party did so through their solicitors. No criticism was advanced that the solicitors had a conflict of interest and duty.

Neither party had raised any concern as to the amount of their lawyers’ fees and disbursements, and no one applied for any such hearing. Following submissions, the Court made findings that costs agreements were void and that solicitors (who were not joined to the proceedings) had breached the Civil Procedure Act 2010, and that fees were not fair and reasonable, and ordered that both solicitors’ costs be taxed, as between solicitor and client, by the Costs Court. It made the taxation order pursuant to r. 63.65, which commences ‘This Rule applies where the Court by order, whether or not made by or under any Act, refers a bill of costs to the Costs Court for taxation or directs that a bill of costs be taxed’.

Keybridge Capital (2022)

The applicant for taxation in Keybridge Capital Ltd v Macpherson Kelley Pty Ltd [2022] VSC 831 was a public company, and so a sophisticated client to whom limited costs disclosure requirements applied. The respondent lawyers argued that the Court did not have the statutory jurisdiction they had sought to invoke because:

    • the final bill in the first matter, governed by the Legal Profession Act 2004, was more than 12 months prior to the summons for taxation, and as a sophisticated client, the applicant was not permitted to seek an extension of time in which to seek taxation; and
    • the second matter was governed by the Legal Profession Uniform Law which gave public companies (and so ‘commercial or government clients’) no right to have their costs assessed (s. 170).[2]

The Court found that there was only one matter, even though there were two different costs agreements with slightly different parties each referring to a different governing Act separated by a long period of inactivity in the engagement. The Court found that that matter was governed by the Legal Profession Act 2004, and that the summons was brought within 12 months of the final bill, and so was within time, and within the s. 17D(1)(f) grant of jurisdiction (‘must hear and determine reviews under … the Legal Profession Act 2004’). Accordingly, everything else the Court said was obiter dicta.

But the Costs Judge also found that the Costs Court had jurisdiction under s. 17D(1)(a) of the Supreme Court Act 1986(‘has jurisdiction to hear and determine the assessment, settling, taxation or review of costs in all proceedings in the Court’) because the costs assessment was in respect of legal costs charged by the solicitor respondent to the applicant client in Supreme Court litigation. Since no time limit is specified for an application for taxation under s. 17D(1)(a), the corollary seems to be that there is no time limit for a client to seek taxation of costs charged by their lawyers in Supreme Court proceedings.

Then the Court turned to s. 17D(1)(h) (‘any other jurisdiction in relation to costs given by’ the Supreme Court Act or the Supreme Court Rules), and considered two questions:

(a)        whether r. 63.58 gave the Costs Court jurisdiction; and

(b)       whether r. 63.35 gave the Costs Court the Supreme Court’s inherent jurisdiction.

The Court found that it did not have jurisdiction under s. 17D(1)(h) on the basis of the applicant’s first argument. That was that r. 63.58 allows taxation of costs as between solicitor and client pursuant to an agreement that costs may be taxed in the Costs Court.

The client pointed to a clause in the original costs agreement which said that costs could be taxed in the Costs Court. Because the parties had agreed that the solicitors’ costs could be taxed in the Costs Court they could be taxed, the client argued, even if but for the agreement that course would not have been permitted under the Legal Profession Act 2004. The Court found that r. 63.58 provided for procedures where the Court otherwise had jurisdiction, rather than being a grant of jurisdiction which would not ordinarily be found in rules of court, applying Woolf v Snipe (1993) 48 CLR 677.

But, most interestingly for present purposes, the Costs Court decided at [48] et seq that r. 63.35 was a grant of jurisdiction found in the Court’s rules and given to the Costs Court by s. 17D(1)(h) which did give the Costs Court the Supreme Court’s inherent jurisdiction. And had it needed to resort to it, it would have:

‘49 The Court has an inherent jurisdiction as to whether to tax the costs of a proceeding. Rule s. 63.35 of the Rules provides that on a taxation of costs, the Costs Court has the same powers which an associate judge has on the hearing of an application in a proceeding. The associate judge’s powers are found in r 77.01 of the Rules, which provides that an associate judge may, in any proceeding to which the Rules apply, give judgment or make any order including any judgment or order in the exercise of the inherent jurisdiction of the Court.’

The Court would have exercised the discretion to tax the solicitors’ costs at the suit of the public company in its inherent jurisdiction because they had given various estimates of what the litigation might cost the public company which turned out to be inaccurate, and the lawyers charged nearly $800,000 which was said to be a lot.

The lawyers pointed out that they were not obliged under the Legal Profession Act 2004 to give any costs disclosures to a public company, including to update any disclosures which had been given.  The Costs Court disagreed at [57]:

‘Pursuant to s 3.4.12 of the [Legal Profession Act 2004] disclosure is not required to be made to a public company. Even though the respondent was not required to make a disclosure to a public company – the applicant – it did. Once disclosure is made, then the respondent becomes subject to the ongoing disclosure obligations of s 3.4.16 of the [Legal Profession Act 2004]. Section 3.4.12 of the [Legal Profession Act 2004] simply refers to disclosure under ss 3.4.9 and 3.4.10. It does not refer to s 3.4.16, which provides that a law practice must disclose any substantial change to anything already included in a disclosure.’

Hartnett v Bell (2023)

In Hartnett v Bell [2023] NSWCA 244,[3] a mortgagor sought to invoke the inherent supervisory jurisdiction of the Supreme Court of NSW to obtain an order that the mortgagee’s solicitor disgorge to the mortgagor amounts by which the solicitor had overcharged the mortgagee and which had been deducted from the mortgage sale of the mortgaged property and appropriated by the solicitor.

The mortgagee had obtained a sale order from the Supreme Court of NSW upon the mortgagor’s failure to pay the mortgaged sum of $30,000 and an order that the mortgagor pay the mortgagee’s costs of that proceeding, and future costs, on an indemnity basis.

The proceedings were undefended but the mortgagee’s solicitor claimed to have managed to rack up $288,601, leaving just $33,834 available to the mortgagor from the sale proceeds of $376,000, after the mortgage and the mortgagee’s costs were paid.

The mortgagor had the past costs payable under that order assessed by the NSW equivalent of a taxation, i.e. a costs assessment by a Court-appointed costs assessor. Neither the mortgagee nor her solicitor cooperated or participated. So the costs assessor fixed the costs, as between the mortgagor and the mortgagee, at $40,000, 14% of what the mortgagee’s solicitor had charged.

The mortgagor’s claim against the mortgagee’s solicitor in the Supreme Court of NSW for the difference between the costs paid from the sale proceeds and the $40,000 costs assessment failed as a restitution claim but succeeded following invocation of the inherent supervisory jurisdiction.  Recognising that the solicitor was not bound by the costs assessment to which he had not been a party, the Court did its own quantification exercise of the reasonable costs, and — equally unaided by evidence from the solicitor as the costs assessor had been — came to the same result as the costs assessor had.

The trial judge’s decision rested on both the inherent jurisdiction and s. 99 of the Civil Procedure Act 2005 (NSW), which permits courts to deprive lawyers of their costs in civil proceedings: [85], but the Court of Appeal did not rest its decision on this provision: [95].  The Court did approve of the lower court’s invocation of ss. 56-60 of that Act in justifying its decision to roll up its sleeves and deal with the mortgagor’s dispute with the mortgagee’s solicitor in a broad brush fashion rather than leaving the question to a costs assessor in a costs assessment as between third party payer and the solicitor, even though both parties had agreed that that would be an appropriate course: [110], [142].

Lehrman v Network Ten Limited (2024)

Lehrman v Network Ten Limited [2024] FCA 102 is Justice Lee’s reasons for finding that Channel 10 was obliged to pay its employee Lisa Wilkinson’s legal costs despite having offered to defend her by the same lawyers as are defending Channel 10 in Bruce Lehrman’s not-yet-determined defamation claim about Ms Wilkinson’s interview with Brittany Higgins.

There remains a dispute between Channel 10 and its employee about whether and to what extent the quantum of costs charged to her is reasonable. Drawing inspiration from (and perhaps shocked by the procedural horror of) Hartnett v Bell, the Court foreshadowed resolving this question itself, rather than leaving the parties to the usual solicitor-client costs processes under the Legal Profession Uniform Law, by referring the question of the reasonable costs to a referee, at the same time as the question of costs as between party and party fell to be resolved.

It occurs to me that another reason why such a procedure might be appropriate is that costs which are reasonably incurred in the sense relevant to an employer’s indemnity of an employee might not be precisely co-extensive with what is ‘fair and reasonable’ as between the employee and her solicitor in the s. 200 Uniform Law sense.  If the employee’s solicitors had engaged in some costs disclosure default technically voiding their costs agreement, but in a way immaterial to the employee and which she did not wish to take advantage of, is that a question which should be taken into consideration in fixing the amount recoverable under an employer’s indemnity, for example?

His Honour observed at [55] that ‘I do not consider (and it has not been suggested) that the implied (not inherent) power of the Federal Court means its powers to control costs incurred in proceedings before the Court is necessarily restricted by the assessment process under the Uniform Law.’

[1] See Stephen Warne ‘Supreme Court flexes inherent jurisdiction of its own motion’ The Australian Profsesional Liability Blog, 16 July 2021.

[2] See Victorian Legal Services Commissioner v Barrett [2019] VCAT 290.

[3] See Stephen Warne ‘NSWCA takes inherent supervisory jurisdiction over its officers into new territory,’ The Australian Professional Liability Blog, 26 February 2024.

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