Costs recovery in pro bono cases in Victorian state courts: Part 3

I was asked to talk to my colleagues at the Victorian Bar recently in relation to costs recovery in pro bono cases. It is now more certain that costs may be recovered from the other side by victorious litigants who engage their lawyers on the basis of a greater variety of pro bono arrangements. That is as a result of both recent developments in the judge-made law and changes to the Supreme and County Courts’ rules. Over the last few days, I published parts one and two of the paper I distributed. What follows is the third and final part, which considers different kinds of client-favourable costs agreements (some quite esoteric) and analyses their indemnity principle implications. It also provides some thoughts on how to draft costs agreements for work done otherwise than on a purely commercial basis, and how to ensure counsel get paid. Part one is here and part two here

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Species of client-favourable costs agreements

Options available to lawyers who wish to do work at less than their usual rates for non-commercial reasons include:

(a) not making any arrangements as to fees at all;

(b) charging your usual rates and leaving it to your discretion whether you send out a bill, or whether you forgive some or all bills given in the event that certain outcomes obtain;promising to do the work for free;

(d) doing the work on a no win = reduced fee basis;

(e) doing the work no win = no fee;

(f) doing the work no costs order = no fee;

(g) doing the work on no actual recovery of costs / compensation / costs or compensation = no fee basis. Continue reading “Costs recovery in pro bono cases in Victorian state courts: Part 3”

11 December, 201711 December, 2017

Costs recovery in pro bono cases in Victorian state courts: Part 2

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Case law

The Court of Appeal declared that the indemnity principle is not offended by a costs agreement which is conditional on the client obtaining a costs order in Mainieri v Cirillo (2014) 47 VR 127. In that case, the successful party’s solicitors’ costs agreement said: Continue reading “Costs recovery in pro bono cases in Victorian state courts: Part 2”

7 December, 20177 December, 2017

Costs recovery in pro bono cases in Victorian state courts: Part 1

The issue

The amendments to Order 63 of the Supreme Court’s rules and of Order 63A of the County Court’s rules are designed to overcome one aspect of the operation of the indemnity principle in costs law.

Simply put, costs are awarded as a partial indemnity to a successful party for that party’s liability to pay their own lawyers and witnesses and for such payments already made.[1] The indemnity principle says that the amount allowed under a costs order may not exceed the total of those liabilities. Put most pithily, the loser’s costs liability cannot be greater than the winner’s fees and disbursements. Continue reading “Costs recovery in pro bono cases in Victorian state courts: Part 1”

8 March, 2017

The latest on pro bono costs agreements which preserve the possibility of a costs order against the other side

For far too long, the law was unclear about whether costs agreements which said ‘We’ll only charge you if you win and only for work in respect of which we get a costs order’ actually worked. The problem was that losing parties invoked the indemnity principle in the law of costs, arguing that what was recoverable under a costs order was nil. The indemnity principle says that party-party costs awards are in no way punitive; they are wholly compensatory. Party-party costs orders are awarded as a partial indemnity to the winning party’s liability for their lawyers’ fees and other expenses of the litigation. If the winning party has no such liability at the time of the costs order, there is nothing for the losing party to be ordered partially to indemnify. Where the winner’s liability to pay their lawyer was conditional on a party-party costs order, there was, at the moment of making the costs order, nothing to indemnify. Wentworth v Rogers [2006] NSWCA 145 was the leading case for many years. Justice Santow’s dictum was favourable to pro bono solicitors while Justice Basten’s was unfavourable. The third judge did not weigh in on this question.

What the judges in that case said, however, was obiter dicta. Now there is a unanimous decision of the Victorian Court of Appeal which actually decides that this kind of costs agreement works; the winning party may obtain from the losing party a party-party costs order by way of a partial indemnity against the liability to pay their lawyers. The case is Mainieri v Cirillo [2014] VSCA 227 and Nettle, Hansen and Santamaria JJA expressly preferred Justice Santow’s reasoning in Wentworth. It may be expected that state courts, including Courts of Appeal, elsewhere in Australia will follow the Victorian Court’s decision: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 at [134] and [158].

That is the good news though. The bad news is that an unfortunate level of confusion still prevails in relation to costs agreements which are even closer to pure pro bono in that they say ‘We won’t charge you anything unless you get a costs order, and then we will only charge you so much as you are actually able to recover from the person ordered to pay costs under the costs order’. A costs agreement which was, as a matter of substance, to that effect was found not to present a problem in LM Investment Management Limited v The Members of the LM Managed Performance Fund [2014] QSC 54. Then in Mainieri, the Court of Appeal left open in obiter dicta the possibility that a costs agreement in which the winning party’s liability to pay their solicitors was conditional on recovery of costs from the losing party might not work. Subsequently, in Mourik v Von Marburg [2016] VSC 601 the Costs Judge in Victoria decided that such an agreement in fact does not work, but the correctness of that decision has subsequently been doubted in dicta of a Victorian Federal Court judge sitting in Sydney. What a mess. But I am not convinced that the pro bono sector should give up on obtaining judicial recognition of a costs agreement which, as a matter of substance, predicates recovery of costs on the actual recovery of costs from the other side. Continue reading “The latest on pro bono costs agreements which preserve the possibility of a costs order against the other side”

6 June, 201410 June, 2014

Efficacity of lawyers’ retainers effected by written instructions procured by crash n bash agents

The Local Court of NSW has released for publication a considered decision about costs in what it treated as a test case, Foot v Burrett [2013] NSWLC 26. A man’s car was damaged. It was taken to panel beaters in Marrickville. He there signed a document in order to get use of a replacement car while his car was being repaired. He did not have to pay until later and it seems to have been anticipated that the repairer would pursue the cost from the allegedly negligent other driver on the man’s behalf. The transaction was something like (but probably not) the man giving the repairer an equitable assignment of his right to damages for loss of the use of his vehicle against the allegedly negligent other driver in return for the free use of a car. The document authorised Boston Commercial Services Pty Ltd to act for the man in recovering the costs of hiring the replacement car from the allegedly negligent driver who allegedly caused the property damage. The document also said:

‘I hereby consent to Boston instructing Dejure Commercial Lawyers as my Solicitor on the record in respect of any proceedings commenced in relation to this retainer and I hereby retain Dejure on the terms and conditions of Boston’s existing retainer with Dejure….’

Proceedings were commenced in the man’s name. Dejure Commercial Lawyers went on the record for him. It is apparent that the man was required by the circumstances of the litigation to have an involvement in it. The other driver lost. He was ordered to pay costs. He invoked the indemnity principle, saying that the man had no liability to pay Dejure Commercial Lawyers’ costs and so could not recover a partial indemnity against any such liability in the form of party-party costs. The Court, treating the question as a test case, declined to accept that argument. The decision casts doubt on the correctness in law of positions adopted by various legal disciplinary bodies as to the impropriety of lawyers accepting instructions from interested third parties in writing obtained from the agent. The Court seemed a lot less perturbed by this mode of retainer than the Victorian Legal Services Commissioner tends to be, saying helpfully: Continue reading “Efficacity of lawyers’ retainers effected by written instructions procured by crash n bash agents”

6 June, 2014

Is solicitor-director of ILP which acted for him to be treated as self-represented?

A NSW solicitor was partially successful in a defamation suit. But for the circumstance that he had retained an incorporated legal practice with which he was associated and for part of the time the director and the file handler, the Court was willing to order the defendant to pay his costs on an indemnity basis. In respect of the period in which the solicitor was — the fictions of corporations law aside — substantially self-represented, his costs were ordered to be assessed on the ordinary basis. What McCallum J said in McMahon v John Fairfax Publications Pty Ltd (No 8) [2014] NSWSC 673 is:

Continue reading “Is solicitor-director of ILP which acted for him to be treated as self-represented?”