The Supreme Courts’ inherent supervisory jurisdiction (lawyers’ fees) Part 2

2. The inherent supervisory jurisdiction of the Supreme Court

Woolf v Snipe (1933) 48 CLR 677 is a decision of the High Court in its original jurisdiction, constituted by Sir Owen Dixon who observed at 678-679 that ‘The superior Courts of law and equity possess a jurisdiction to ascertain, by taxation, moderation, or fixation, the costs, charges, and disbursements claimed by an attorney or solicitor from his client,’ and that there were three sources of that jurisdiction:

- That ‘founded upon the relation to the Court of attorneys and solicitors considered as its officers.[1] This jurisdiction … enables it to regulate the charges made for work done by attorneys and solicitors of the Court in that capacity, and to prevent exorbitant demands.’
- That to determine by taxation or analogous proceeding the amount of costs whenever a contested claim for costs comes before the Court which it has jurisdiction to determine.[2]
- The statutory jurisdiction (now found in the Legal Profession Uniform Law).

Continue reading “The Supreme Courts’ inherent supervisory jurisdiction (lawyers’ fees) Part 2”

20 March, 202420 March, 2024

The Supreme Courts’ inherent supervisory jurisdiction (lawyers’ fees) Part 1

I gave a talk to the National Costs Law Conference put on by the Law Institute of Victoria the other day. This is part 1 of the paper which accompanied it. The balance will follow.

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The unlimited jurisdiction of the Supreme Court

The Supreme Court of Victoria has a constitutionally entrenched unlimited[1] subject matter jurisdiction. Section 85(1) of the Constitution Act 1975 (Vic) says Continue reading “The Supreme Courts’ inherent supervisory jurisdiction (lawyers’ fees) Part 1”

19 December, 201720 December, 2017

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”

21 April, 2017

What can barristers charge for?

I gave a presentation at the really well organised Junior Bar Conference this year. The Bar sought questions which the junior barristers who attended wanted answers to. One question, which I thought odd, but which I answered earnestly, was ‘What can a barrister charge for?’ This was my answer:

The starting position is freedom of contract, such that barristers can charge for whatever they can get someone to promise to pay. The costs provisions of the LPUL (the Legal Profession Uniform Law (Victoria)) mostly do not apply in favour of commercial or government clients and commercial and government third party payers. There is newly room, therefore, for much greater creativity in contracting with such clients. Note the application of some provisions about conditional costs agreements and contingency fees, however, even in relation to such clients and such third party payers: s. 170. Continue reading “What can barristers charge for?”

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”

29 April, 201429 April, 2014

What does ‘pro bono’ mean? Are ‘semi-pro bono’ costs agreements legally efficacious?

Hidden away in Trkulja v Efron [2014] VSCA 76, at footnote 49, is a little dictum of the Chief Justice and Justice of Appeal Santamaria which explains their Honours’ understanding of the term ‘pro bono’:

‘In current legal practice, the expression ‘pro bono basis’ is understood to refer to the basis where a practitioner offers his or her services on a voluntary basis without any entitlement to or expectation of remuneration.’

Practitioners should, it seems to me, think carefully before describing themselves as acting ‘pro bono’ when their retainers provide for them to be paid out of the proceeds of a costs order made in favour of their client in litigation to be paid by their client’s opponent in the litigation.

There has been uncertainty in relation to the efficacy of a retainer which says ‘I will charge you $300 per hour but will seek to recover it from you only if you obtain an order that the other party pay your costs, and then I will only seek to recover my fees to the extent of the other side’s liability under the costs order’ or any variation of that concept.

The issue was that the indemnity principle requires total party-party costs to be no more than the liability of the person seeking the costs order to their own lawyers for costs. If the liability depends on the making of a costs order, until the order is made, the liability is nil, so that the indemnity principle precludes the making of the order in the first place (so the argument goes). The latest important decision to endorse this reasoning, albeit in dicta, was King v King [2012] QCA 81.

Now if there is a principle which is properly described as ‘flexible’, it is the indemnity principle in costs law and it is a matter of surprise to me that the uncertainty has persisted so long given the obvious desirability from the perspective of access to justice to sanctioning such arrangements.

Happily, the Supreme Court of Queensland recently gave a decision this year which decided as a matter of ratio that an otherwise orthodox hourly rates costs agreement which included the following special condition was efficacious and did not offend against the indemnity principle:

‘No fees will be payable by you unless an order is made by the Supreme Court of Queensland in your favour for the payment of costs and those costs are recovered by us from other parties and any fees charged shall be limited to the amount of costs so recovered.’ Continue reading “What does ‘pro bono’ mean? Are ‘semi-pro bono’ costs agreements legally efficacious?”

11 September, 201112 September, 2011

Client joy to abound in draft national profession legislation’s costs provisions

For a long time after the new national profession legislation is introduced, if it is introduced in its present form, many lawyers are likely to find themselves restricted to charging scale, and not being able to recover their costs until there has been a taxation in the Costs Court, even when they have negotiated a costs agreement.

Reproduced below is that part of the proposed national law regulating lawyers that relates to legal costs. The whole draft law may be downloaded here, and it is hoped that this will be the final version to be adopted by Victoria, New South Wales, Queensland and the Northern Territory, home to about 85% of Australia’s lawyers. Truly scary stuff:

There is an obligation that all legal costs be ‘no more than fair and reasonable in all the circumstances’ and that ‘in particular’, they be ‘(a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount’: s. 4.3.4(1);
A costs agreement will be only ‘prima facie’ evidence that costs disclosed in it are fair and reasonable in that sense: s. 4.3.4(4); and
Non-compliance with any of the costs disclosure obligations will render the costs agreement void: s. 4.3.9(1)(a) and the client need not pay them [on scale…] until they have been taxed as between solicitor and own client.

The first point really introduces into the Act fairness and reasonableness requirements as to the amount billed which presently only apply expressly at the moment of taxation, and which are found in r. 63.61 of the Supreme Court Rules, which says ‘(1) On a taxation of the costs payable to a solicitor by the solicitor’s client all costs reasonably incurred and of reasonable amount shall be allowed.’ The present s. 3.4.44 of the Legal Profession Act, 2004 is more limited in its restraint of billing, in the case of negotiated costs agreements. It says ‘(1) In conducting a review of legal costs, the Costs Court must consider- (a) whether or not it was reasonable to carry out the work to which the legal costs relate; and (b) whether or not the work was carried out in a reasonable manner’: nothing about the reasonableness of the amount billed per se.

Since virtually no lawyers I have anything to do with manage to comply to the letter with the existing not dissimilar costs disclosure obligations, it seems very likely that there will be a lot of retainers in which the client will be able to establish the voidness of the costs agreements. Lawyers will then be left to seek recovery of their costs on scale, but may not have recorded the information necessary to prepare a scale bill in taxable form which will do justice to the work they have done. Fun times ahead for costs lawyers!

Compare the situation presently in Victoria where non-compliance with the costs disclosure obligations only [I never thought I would say ‘only’] means that the client need not pay the fees until they have been taxed as between solicitor and own client, and on that taxation, the solicitor is presumptively liable to pay its costs, and the taxed costs are to be discounted by a proportion that reflects the seriousness of the non-disclosure. Presently, the costs agreement will be disregarded only when it is set aside by VCAT (a jurisdiction which looks to fall away), or where by virtue of a material non-disclosure, it is disregarded pursuant to s. 3.4.44A of the Legal Profession Act, 2004, which has rarely happened. Continue reading “Client joy to abound in draft national profession legislation’s costs provisions”

25 June, 201125 June, 2011

Victorian Supreme Court takes relaxed approach to conditions for validity of no-win no-fee costs agreements

Legal Services Board v DF [2011] VSC 292 will be of considerable interest to those who draft and work within no-win no-fee retainers. Justice Karin Emerton found that though Victoria’s repealed Legal Practice Act, 1996 implicitly prohibited the charging of uplift fees otherwise than upon a ‘successful outcome’ it was open to parties to provide for the payment of an uplift in circumstances which could not be described, in ordinary parlance, as a ‘successful outcome’, such as where the client terminates the solicitor’s retainer. Her Honour also found that ‘if you recover any money from your case’ was a sufficient definition of the ‘successful outcome’, finding that objectively construed, what those words meant were ‘if you recover any compensation’, as opposed to costs. The decision will be of assistance in interpreting the similar provisions under Victoria’s Legal Profession Act, 2004 and the other states’ (South Australia excepted) equivalents.

Continue reading “Victorian Supreme Court takes relaxed approach to conditions for validity of no-win no-fee costs agreements”

19 October, 20099 November, 2009

Solicitor’s equitable charge to secure fees declared void

The plaintiff in Brott v Shtrambrandt [2009] VSC 467 is not having much luck. First of all, he cut what he thought was a plea bargain in a professional misconduct prosecution only to have VCAT’s Legal Practice List increase by 50% the penalty he and the Law Insitute had agreed jointly to contend was appropriate, so that his practising certificate was cancelled and he was prohibited from applying for a new one for 9 months: Law Institute of Victoria v Brott [2008] VCAT 1998. But the extra penalty all became a bit academic when he was prohibited from applying for a new practising certificate until 2014 in a professional misconduct prosecution he contested and lost disastrously (Legal Services Commissioner v Brott [2008] VCAT 2399, and then lost on appeal ([2009] VSCA 55), paying the Commissioner’s costs all the way and suffering withering criticism. Then, in a suit by the solicitor for fees charged back in the day when he was allowed to charge them, Justice Beach has inconveniently declared that what sounded like a pretty kick-arse charge fell foul of the Consumer Credit Code and was void. Section 40 of the Code voids any mortgages (including equitable charges) governed by the Code which do not describe or identify the charged property. ‘[A]ll estates or interests in real estate which I now have or may hereafter acquire’ did not cut the mustard as a description.

Not all costs agreements will be credit contracts governed by the Code. I bet there are a lot of solicitors out there with void equitable charges, however. They will need to proceed with great care in fixing the problem. Unless they procure the amelioration of the position with retrospective effect with the utmost probity, the ‘fix’ may in fact be challenged in the various jurisdictions which give expression to the law’s tenderness towards clients in their dealings with solicitors. It would be sensible to obtain advice if the amount secured by the questionable charge is of sufficient significance to them. Continue reading “Solicitor’s equitable charge to secure fees declared void”

18 May, 200918 May, 2009

Termination of a no-win no-fee retainer

Mr Burmingham is the subject of three posts already. They dealt with three discrete aspects of his case, Maurice B Pty Ltd v Burmingham [2009] VSC 20: a titillating detail, advocates’ immunity, and the nature of the suit for fees. But his case was really mostly about what happens when a no-win no-fee costs agreement is terminated before the end of the case. Of course, it all depends on what the costs agreement says, and this costs agreement was presumably the result of many years’ honing by one of Australia’s foremost plaintiff firms. Justice Byrne was not complimentary of the draftsmen (nor of the court book’s reverse chronological order, a bugbear of my own). But in the end, the lawyers got their fees even though they did not obtain a successful result for Mr Burmingham. Continue reading “Termination of a no-win no-fee retainer”

15 February, 20081 March, 2008

On blogging

The other day, I did a very geeky thing which was also a bit unonline. I had a coffee with fellow lawyer blogger, the mysterious Legal Eagle. One result of the coffee was that somehow I charmed her into writing a second case note of interest to readers of this blog — this time on the long and not entirely straightforward decision of the Victorian Court of Appeal in Equuscorp v Wilmoth Field Warne, referred to briefly in my post ‘Cases, cases’. Go read it. A second may have been that Ms Eagle has ‘tagged’ me with a ‘meme’. It’s very blogosphere. I will participate, but one of the three limbs of this modern day chain letter is going to die with me as I don’t intend to tag anyone else. I will be very grateful if some of the effusive commenters over at her blog migrate over to mine and get a bit of discussion going. So, 3 reasons why I blog. Continue reading “On blogging”

25 March, 2007

Rotten one day, perfect the next: Queensland’s complaints system

Now, that’s a cheap headline, I know, but I couldn’t resist. Queensland Legal Services Commissioner John Birton’s recent speech extolling the virtues of his office does read a bit like that, but probably deservedly so. The statistics he quotes speak for themselves: he’s not falling prey to the tendency of some regulators to drown in going through the procedures of unmeritorious complaints and having no time for greater proactivity. On the contrary, he is chortling about instituting an average of 22 investigations of his own initiative every month. For those who can’t be bothered reading it, here are some interesting tidbits: Continue reading “Rotten one day, perfect the next: Queensland’s complaints system”

17 March, 2007

Labour law firm confirms $1 million bonus to partner on class action win

A leading Melbourne labour law firm has confirmed paying its best known partner a $1 million bonus for procuring a settlement of the Dow Corning breast implants class action. Nothing wrong with that, by the way; I mention it only for prurient interest and to provide some context to the work the firm does pushing back the frontiers of injustice. A former partner’s suit making sensational allegations against the partnership was settled soon after details of those allegations were released by The Australian. But the former partner has now unconditionally withdrawn the allegations, apologised, and discontinued the proceedings. The firm has, however, confirmed that its head honcho received the $1 million bonus for procuring a $32 million settlement from Dow Corning, the company bankrupted by class actions around the world — many of the statements of claim containing the same typos, according to Walter Olson — involving what is now thought to be very questionable science indeed. (Something Andrew Bolt has cottoned onto — but note the egregious error in his article which claims that fees in no-win no-fee litigation in Australia may be “up to a quarter of any payout”. That is quite wrong. A success fee may be no more than 125% of the fees usually charged by the firm. What Bolt is describing is a US-style contingency fee which is stringently forbidden in Victoria.)

10 February, 200710 February, 2007

Texas Supreme Court strikes down contingency fee agreement provision

In Hoover Slovacek LLP v. Walton, Supreme Court of Texas, 3 November 2006, the Court severed a provision in a contingency fee agreement which entitled the lawyer to three-tenths of the “present value of the claim” forthwith upon termination by the client, whether for just cause or not. Instead, the lawyer recovered three-tenths of the actual recovery, and only once there had been a recovery. Continue reading “Texas Supreme Court strikes down contingency fee agreement provision”

27 January, 200727 January, 2007

US lawyer castigated for accepting less than 1/3 contingency fee

Thanks to Overlawyered I bring you the story of the US plaintiffs’ lawyer who has advertised for personal injury work arising out of car accidents on a 15% contingency fee basis instead of the normal 33%. The mischievous quirk of behaviour has not been particularly warmly accepted by his peers. This post looks at that story and at the euqivalent laws in Victoria where lawyers working no-win no-fee are not allowed to charge a percentage of the client’s winnings, but are allowed to jack up their normal rates by up to 25% in no-win no-fee cases which are “successful”. Continue reading “US lawyer castigated for accepting less than 1/3 contingency fee”

29 October, 200625 June, 2007

Roisin Annesley’s Victorian Barristers’ practice guide

The Bar has produced a practice guide. It is a great achievement and stands as a beacon for the Law Institute’s future efforts at promulgating knowledge of the practice rules. The Bar actually has something called the Professional Standards Education Committee. Written by Roisin Annesley, it was launched by Victoria Marles, the Legal Services Commissioner on 18 October 2006, and distributed free to every member of the Bar. Annesley has done a lot of work as Counsel Assisting the Legal Profession Tribunal (and continues to do occasional work assisting the Legal Practice List at VCAT). A doyen of professional discipline, Paul Lacava SC, and a judge who has excoriated Professional Standards, Justice Gillard, are credited with substantial involvement. It has chapters on: Continue reading “Roisin Annesley’s Victorian Barristers’ practice guide”

7 September, 2006

Fiduciary duties and the sophisticated client

Gee do plaintiffs adore sprinkling a bit of fiduciary duty action into their pleadings against solicitors. Their counsel see it as moon dust. A sophisiticated plaintiff (who had been party to separate litigation which eventually culminated in a High Court case about contractual certainty) tried it on in a somewhat novel way in Equuscorp Pty Ltd v Wilmoth Field Warne (No 3) [2004] VSC 164 but bombed out before Justice Byrne. Continue reading “Fiduciary duties and the sophisticated client”

28 August, 200629 April, 2007

WA solicitor guilty of unprofessional conduct in “No compensation = No legal fees” ad

Legal Practitioners’ Complaints Committee v SJB [2006] WASAT 201

It is a serious crime in Western Australia to advertise in a way calculated to cause a person make a personal injury claim. A solicitor ran ads headed “Injured in a road accident and made a claim? If so, read on. [footnote: If you have not made a claim, disregard this advertisement.]” A narrow construction of the provision was adopted, consistent with the seriousness of the offence it created, and no breach was found. But not enough was done to explain “No compensation = No legal fees” and the misleading nature of those words amounted to unprofessional conduct as a falling short of the standard of conduct observed and approved by members of the profession of good repute and competence. Continue reading “WA solicitor guilty of unprofessional conduct in “No compensation = No legal fees” ad”