Jordans, a Bristol publisher, kindly sent me a copy of Dr Mark Friston’s Civil Costs; Law and Practice. It was published as a first edition in April 2010 at a cost of ₤75. A monumental work of over 1200 pages, it competes in England with LexisNexis’s Cook on Costs, published annually. Its scope may be divined from the statement of contents here. Dr Friston is a practising barrister with a particular interest in class actions who has specifically set out to write a practitioner’s text, stating the law without unnecessary excursions into what the law used to be, or what it should be. The relevant legislation is reproduced, and there are precedents up the back, including precedents for the suit for fees, and the defence in such a suit. It is replete with pin-point citation of modern authority. It is a good book, and one that I am pleased to have in my library. All Australian costs lawyers probably have Dal Pont’s The Law of Costs ($275) and access to Roger Quick and David Garnsworthy’s Quick on Costs ($2,400), but Friston’s text does not appear to be held by the Law Institute Library or the Victorian Supreme Court Library. To have the English law in one’s chambers is to have a competitive advantage for those called on to argue difficult costs cases, or to argue key concepts in Victoria’s Civil Procedure Act, 2010 which have for some time already been a part of the English civil procedure landscape, such as the concept of proportionalilty in the award of costs. Continue reading “Dr Mark Friston’s ‘Civil Costs’: a Review”
Federal Court says Jarndyce v Jarndyce is to be kept front of mind by Costs Courts
For some reason I have agreed to give a seminar on the ethics of billing by the hour, one of those topics so big that I have until now avoided tinkering around the edges of it. My distinguished collaborators, who will give separate papers at the 7 September 2011 seminar in Melbourne, will be Costs Judge Jamie Wood and Liz Harris, head honcho at Harris Costs Lawyers. My researches begin here, today, with a look at a recent decision of Justice John Logan of the Federal Court in Queensland who has a few days ago delivered a leviathan costs judgment (Wide Bay Conservation Council Inc v Burnett Water Pty Ltd (No 9) [2011] FCA 661) in which he awarded solicitor-client costs against the applicant in respect of failed allegations of misconduct and said:
‘Some of the language employed in [the scale] in respect of particular items is indeed redolent of a 19th century legal office – “engross” and “folio”, for example. This acknowledged, to approach the subject of how much reasonably to allow in respect of legal costs by recalling the works of Charles Dickens may not, with respect, necessarily be a bad thing.’
His Honour then went on to catalogue judicial diatribes against the billable hour, via a reference to Bleak House: Continue reading “Federal Court says Jarndyce v Jarndyce is to be kept front of mind by Costs Courts”
Problems abound when one spouse’s solicitor conveys matrimonial property by order of the Court
Update, 6 June 2011: A reader has helpfully pointed out that the decision digested below has been overturned by a unanimous Court of Appeal, the principal judgment having been given by Justice McMurdo. See Legal Services Commissioner v Wright [2010] QCA 321.
Original post: The Family Court likes to order that one spouse’s solicitor act for both spouses in the conveyance of matrimonial property which it orders be sold. That this may occur exemplifies the principle that it is not enough that clients’ interests conflict for a conflict of duties to proscribe a multiple client retainer; what is necessary is that they conflict materially in relation to the matter which is the subject of the retainer. But I have acted in three matters where such an order has resulted in problems, and that suggests to me that there are many more such matters which have run into problems. Generally, the problems arise from the solicitor ignoring in some way the interests of the spouse for whom he or she had previously been acting exclusively, or at least the perception that that is so.
Legal Services Commissioner v Wright [2010] QSC 168 is a variation on the theme. It arose out of a de facto property adjustment case in Queensland’s District Court. The Court ordered that the de facto husband’s solicitor ‘will act on [his] behalf in the conveyance of the sale of the property’, which was in the de facto husband’s name. The de facto husband and wife were then ordered to cooperate in paying out costs of the sale (including the legal fees) and creditors before the balance was to be divided 75% to the de facto wife and 25% to the de facto husband. The Chief Justice of Queensland wasted little ink in concluding that the wife was neither the solicitor’s client nor a third party payer, and so was not even entitled to an itemised bill when the husband’s solicitor charged over $7,000 for the conveyance, directly diminishing the amount reaching her pocket by three-quarters of $7,000.
Where one spouse agrees on the other spouse’s solicitor conducting a conveyance otherwise than expressly for both of them, this case suggests that they would be well advised either to provide for an obligation to pay the solicitor’s fees of a kind which brings them within the definition of ‘third party payer’, or fix the fee payable for the conveyance, or contract for an entitlement to an itemised bill, and thereafter to be deemed by agreement to be a third party payer. Continue reading “Problems abound when one spouse’s solicitor conveys matrimonial property by order of the Court”
Federal Court sets aside bankruptcy notice used for debt collection against solvent individuals as abuse of process
Without first formally demanding payment of a debt, creditors served a bankruptcy notice. The debtors were insolvency practitioners and there was no suggestion that they were insolvent. Federal Magistrate Raphael set aside the notice on the basis it was an abuse of process, issued with a purpose not of making the respondents bankrupt but of embarrassing them. His Honour said:
‘The proper purpose of seeking a sequestration order against the estate of a debtor is so that a debtor, who is unable to pay his debts as and when they fall due, should have his affairs controlled for the benefit of all his creditors and not just specific ones. Allied to this purpose is the prevention of the debtor incurring further obligations which he will not be able to meet. It is a public purpose. The bankruptcy process is not to be used for private ends.’
On appeal, the decision was confirmed by the Federal Court’s Justice Marshall. In Lord v Rankine [2011] FMCA 668, at [20] – [34] (despite the numbering below) his Honour said:
Privilege in a time sheet?
Can a lawyer’s bill be subject to client legal privilege (the Evidence Act, 2008‘s equivalent of the common law’s legal professional privilege)? Can a lawyer’s time sheet be privileged? Yes, if they disclose privileged information, the Supreme Court’s Justice Vickery has reiterated in Hodgson v Amcor Ltd [2011] VSC 204 at [53] to [65] (despite the numbering below): Continue reading “Privilege in a time sheet?”
Costs disclosure defaults and solicitors’ creditors statutory demands addressed to clients for unpaid fees
In AMI Australia Holdings Pty Ltd v PHD Networks Pty Ltd [2011] NSWSC 161, the NSW Supreme Court’s Associate Justice Macready noted another decision, which illustrates the potential for costs disclosure defaults to be raised as a foundation for a genuine dispute such as to warrant the setting aside of a creditors’ statutory demand for unpaid legal fees. The decision of Santow J in Callite Pty Ltd v Adams [2001] NSWSC 52 was described as follows:
‘There, a solicitor served a statutory demand demanding payment of an amount of unpaid legal costs. One of the grounds of challenge to the demand was that the solicitor had failed to make the disclosure required by section 175 of the Legal Profession Act 1987 (NSW). Santow J (as his Honour then was) held that this ground of challenge was not available because no facts were deposed to from which one could infer that there was no fee disclosure and the costs agreement. However, the affidavit did deposed to the receipt of accounts and those accounts were annexed. Santow J held (at [10]) that a perusal of the accounts showed that they lacked the prescribed statutory content as required by section 192 of the Legal Profession Act and a regulation 22A of the Legal Profession Regulations 1994 (NSW). Section 192 of the Act precluded any action being taken for recovery of costs until 30 days had passed after the provision of a bill of costs which complied with the Act. Santow J held (at [12]) that the legal consequences which flowed from the form in which the accounts were rendered were not required to be pleaded in the affidavit. His Honour set aside the statutory demand on the basis that public policy precluded a statutory demand being used to bypass the safeguards of the Legal Profession Act.’
The limits on Kuek v Devflan articulated
The Court of Appeal has had the opportunity promptly to provide a decision illustrating the limits of its previous decision in Kuek v Devflan Pty Ltd [2011] VSCA 25, which I posted about here. The opportunity arose in Shaw v Yarranova Pty Ltd [2011] VSCA 55, a unanimous decision of Justices of Appeal Redlich and Mandie. A third party payer was principally responsible for the fees of the victorious litigant. The vanquished litigant sought to avoid the adverse costs order by invoking the indemnity principle of legal costing by establishing that the victorious litigant had no obligation to pay its lawyers. The Court of Appeal said that the law presumes that there is an obligation on the client to pay its lawyers even if there is evidence of an obligation on a third party to pay the lawyers as well. It made clear that it would not sanction fishing expeditions to displace the presumption. Here, the litigant’s parent company, which was the third party payer, did not have a costs agreement with the lawyers and neither did the litigant. But unless lawyers agree to do work for a client for free, they are entitled to payment on scale even in the absence of a costs agreement. Continue reading “The limits on Kuek v Devflan articulated”
$25,000 fine for cheques in the bottom drawer scheme
The latest decision from VCAT’s Legal Practice List is Legal Services Commissioner v JHMcC [2011] VCAT 231, a ‘guilty plea’ to six charges of professional misconduct. A lawyer purchased a franchise to operate under the name of one of Melbourne’s leading personal injury firms — I never knew such things existed — and was responsible for 1,000 files at a time down in Traralgon. (Don’t try that at home, by the way, kids: I well remember multiple retainers when I was solicitor for a gentleman formerly of the profession who from an office in the suburbs of an Australian capital (not the respondent in this case, obviously), and with the assistance of only non-legal staff, had 1,000 personal injury files open at a time. He was a most vulgar man, insistent on telling me at every opportunity how much money he made, and of the details of his expenditure of it in pursuit of hackneyed hedonism. And he was quite often negligent, apparently regarding the excess he had to pay his indemnity insurer as a cost of business.)
Anyway, our lawyer underpaid tax and suddenly had to pay $160,000 to the tax man, putting financial stress on his business. So, when he received payment of bills from clients, he paid the whole lot into office, wrote cheques made out to barristers for their fees which had been billed to and received from clients as disbursements, and then put them into the bottom drawer to be retrieved and delivered only when convenient to the practice’s cash flow. The solicitor pleaded guilty to six charges of professional misconduct. Charge 6 was of breach of the following fiduciary duty, which I must confess is not one I had previously heard of:
‘to apply such moneys [amounts received for disbursements] in accordance with the purpose for which they were supplied by that client’.
Judge Pamela Jenkins, presently a Vice-President of VCAT and two other members were invited to impose a fine of at least $20,000 and plumped for $25,000. In addition, costs payable by the solicitor were fixed at $6,715.
Costs disclosure obligations and consequences of not complying: part 4
This is part 4 of a serialisation of a paper I gave on about costs disclosure obligations and the consequences of not complying. Parts 1, 2, and 3 are here, here, and here. This post begins to answer the question ‘What must be disclosed’. The balance of the answers to that question is to be found in instalments yet to come. Continue reading “Costs disclosure obligations and consequences of not complying: part 4”
Applicants for taxation can call for other side’s costs agreement and bills
Update: for the incredible backstory to this latest piece in the litigation over $705 in repairs to Mr Kuek’s Toyota Camry, see this story at Justinian. You will have to subscribe for $22.
The indemnity principle in costs law says that an award of party party costs must never exceed the beneficiary’s liability to his or her own lawyers. That is, party party costs must not exceed solicitor-client costs. Traditionally, however, those ordered to pay costs by a court have not been allowed to look at the costs agreement or bills between the party whose costs they have been ordered to pay. Kuek v Devflan Pty Ltd [2011] VSCA 25 says that at least where there is some reason to believe that the indemnity principle might be infringed, the costs disclosure letters, costs agreement, and, probably, solicitor client bills may be inspected by the party ordered to pay the costs, and used to argue the application of the indemnity principle.
Justice of Appeal Hansen, with whom Justices of Appeal Neave and Harper agreed, said that the Taxing Master’s view that ‘the course proposed [requiring production of the costs agreement and costs disclosures, and having regard to them in the taxation] will lead to the taxation of two different bills with additional delay, expense and inconvenience … is a floodgates type argument which is no answer to a taxing officer’s fundamental duty to conduct each taxation on its own merits in accordance with law.’ His Honour continued:
‘This type of issue will not often arise because, in the ordinary case, party / party costs fall well short of the receiving party’s actual liability to its lawyers. But, as I have noted, here the material is sufficient to suggest that the position may be otherwise. It follows that the taxing officer must be satisfied that, as a question of fact, the party / party costs do not exceed the respondents’ liability to their lawyers. Both the Taxing Master and the judge seemed to assume that the consequence of such a factual exercise would be the (inconvenient) step of requiring the respondents to produce a solicitor / client bill, and that there was nothing in the authorities to require a solicitor / client bill. However it does not follow that the factual question posed can only be determined by reference to a solicitor / client bill. It may be readily apparent on the face of the lawyers’ accounts that the receiving party has actually paid its lawyers more than the amount of the party / party bill.’
Many lawyers do not enter into proper costs agreements with their clients, because they trust them to pay the bills. Most lawyers, for a variety of reasons, do not comply perfectly with the costs disclosure regime, but get away with it because their clients are happy with their services and charges, or are ignorant of the consequences of costs disclosure defaults. This decision constitutes a reason why it is important to have a valid costs agreement and to comply with the costs disclosure obligations: otherwise the party may recover less on a party party costs award than he or she otherwise would. The decision whether to do things properly is no longer just a decision about whether to take the risk that the client will unexpectedly take advantage of the law, but must be taken in the context of the lawyer’s duty of care to avoid foreseeable economic loss to the client.
Continue reading “Applicants for taxation can call for other side’s costs agreement and bills”
The prudent way to plead a suit for fees
The case which was the subject of the previous post, Quaresmini v Crouch & Lindon (a firm) [2010] FMCA 750, and Chadwick Lawyers v McMullen [2009] FMCA 992, decisions of Federal Magistrates Wilson and Jarrett sitting in Brisbane suggest what I have long suspected: that it is dangerous to use traditional precedents for suing for legal fees. The relevant bit from Quaresmini is set out in the previous post, and that from McMullen is set out at the end of this post. Although Federal Magistrates’ views on pleadings may not necessarily be listened to by state courts, the endgame of your suit for fees, bankruptcy, may well be played out there. Quaresmini is an illustration of how things can go wrong in the endgame.
Before a Victorian solicitor can sue for fees, she must show that 65 days have elapsed since service conforming with the Legal Profession Act, 2004 (Vic.)’s s. 3.4.34(5) of a bill conforming with ss. 3.4.34 and 3.4.35: so says s. 3.4.33. The requirements for clients other than ‘sophisticated clients’ are:
- the bill must be signed appropriately (generally, by a lawyer);
- it must be served properly (by post, in person, or delivered to the address of the client or his agent authorised to accept legal process, or left with a person who looks at least 16, apparently living or working at the client or agent’s usual or last known residential or business address, but not by fax or email); and
- it must include or be accompanied by a written notice (presumably correctly) setting out the options and time limits for challenging it.
These two decisions suggest that at least these matters ought to be pleaded, along with the basis for the claim for fees. If the basis is a costs agreement, then of course that is a contract which ought to be pleaded like any other contract. If the basis is a scale, then it may be necessary to plead facts which attract the scale to the work. If the basis is the fair and reasonable basis, then the fact that there was no costs agreement and no scale applicable would need to be pleaded, at least.
Is anyone else aware of any other authority on this point, or does anyone have experience of this point having been taken?
Here’s why you should comply with the costs disclosure regime
Quaresmini v Crouch & Lindon (a firm) [2010] FMCA 750 is a salutary tale. The lawyers did some work back in 2007. They sued the client for their unpaid fees and in 2009 got a default judgment having applied successfully for substituted service. Then in 2010, they bankrupted the client. 3 weeks out of time, without any adequate explanation for his delay, the client applied for a review of the decision to bankrupt him, saying that he wanted to apply to set aside the default judgment of which (along with the suit for fees) he had been unaware.
Because the pre-requisites to a suit for fees were not pleaded by the lawyers in the suit for fees, and because they put on no evidence in response to the application for an extension of time that those prerequisites had been satisfied, the Federal Magistrate considered that the client had a sufficiently arguable defence to set aside the bankruptcy to enable him to apply to set aside the judgment. The prerequisites not pleaded or deposed to included the obligation to provide a written notice together with a bill outlining the methods and time limits for challenging it, and identification of the basis (whether in the bill or in the statement of claim) of the claim for the fees — costs agreement, scale or a fair and reasonable charge. It may well be that the solicitors are back to square one, the provision of a lump sum bill which complied with the Legal Profession Act, 2007 (Qld). There are similar provisions in Victoria. The Federal Magistrate said: Continue reading “Here’s why you should comply with the costs disclosure regime”
Costs disclosure obligations and consequences of not complying: part 3
This is part 3 of a serialisation of a paper I gave on about costs disclosure obligations and the consequences of not complying. Parts 1 and 2 are here and here. This post continues the answers to the question ‘To whom need disclosures not be given?’ Anyone who has any insights into the interpretation of the various definitions which refer back to the Corporations Law is invited to provide them by commenting on this post. Continue reading “Costs disclosure obligations and consequences of not complying: part 3”
Costs disclosure obligations and consequences of not complying: part 2
This is part 2 of a serialisation of a paper I gave on costs disclosure obligations under the Legal Profession Act, 2004 and the consequences of not complying. Part 1 is here. This post is not exhaustive of the answers to the question ‘To whom need disclosures not be given?’ For more answers to that question, see subsequent posts. Continue reading “Costs disclosure obligations and consequences of not complying: part 2”
Lodging a civil complaint with the Legal Services Commissioner limits you to compensation of $25,000 per complaint
First of all, happy new year!
The take-home point of this post is that if you lodge a civil complaint (e.g. a pecuniary loss dispute or a costs dispute) with the Legal Services Commissioner, you limit the amount of compensation you can get in VCAT to $25,000 because of s. 4.3.2(1)(c) of the Legal Profession Act, 2004. That prevents the commencement of proceedings in relation to the subject matter of the complaint until the complaint has been finally determined, or dismissed, by which time it will often be res judicata, at least in those cases where the final determination is by VCAT or the Supreme Court or the Court of Appeal (subject, perhaps, to (i) the operation of s. 4.2.14(2), which is what the Court of Appeal calls the ‘two bites of the cherry’ provision, and (ii) the possibility of adding a Fair Trading Act, 1999 cause of action to a proceeding originally instituted in VCAT under the Legal Profession Act, 2004, discussed below). In this touchy feely win win alternative dispute resolution Civil Procedure Act, 2010 world, it is apparently anomalous that those who choose to travel to VCAT’s Legal Practice List via the obvious alternative dispute resolution channel (i.e. via a civil complaint to the Commissioner’s dispute resolution jurisdiction) are penalised so severely in comparison with those who proceed immediately to litigation in that List by invoking the parallel jurisdiction of the Fair Trading Act, 1999. Continue reading “Lodging a civil complaint with the Legal Services Commissioner limits you to compensation of $25,000 per complaint”
Will clients be entitled to seek itemised bills within 7 days under the Australian Consumer Law, 2010?
Patrick Oliver, the head honcho at a cool little Melbourne-based consultancy to incorporated legal practices called Lexcel, has drawn my attention to s. 101 of the Consumer Law, 2010. It provides for ‘consumers’ to request itemised bills from service providers, and requires that they be provided within 7 days, in default of which a pecuniary penalty may be levied. Sub-section (5) says ‘The supplier must ensure that the itemised bill is transparent.’
There is no carve-out for lawyers. I would not be surprised if the double-regulation is fixed by legislative amendment. Meanwhile, however, the full text of s. 101, which commences on 1 January 2011, is as follows: Continue reading “Will clients be entitled to seek itemised bills within 7 days under the Australian Consumer Law, 2010?”
Costs disclosure obligations and consequences of not complying: part 1
Here begins a series of posts on costs disclosure obligations under the Legal Profession Act, 2004, and the consequences of not complying with them. It is a work in process, and I would be grateful for any experiences of this area of the law you might have, and any authorities of interest which I have not included.
* * *
The legislation
We have had costs disclosure obligations mandated by legislation for a long time now. The Legal Practice Act, 1996 came into operation on 1 January 1997, and applied to matters in which the solicitor was retained after that date, and to costs agreements made after that date: cl 18, Schedule 2. There is a similar regime under the Legal Profession Act, 2004, which came into force on 12 December 2005 but, as we will see, the differences are kickers. The Legal Profession Regulations, 2005 contain provisions relevant to about the costs disclosure and bill disclosure regimes alike. Continue reading “Costs disclosure obligations and consequences of not complying: part 1”
On the desirability of requesting a written progress report
I deal with clients who have been economically raped by rapacious lawyers. How these crimes manage to be perpetrated is a source of constant amazement to me. Of course these evildoers never provide written advice. They would be incapable of giving it, and would never tie themselves down like that. Most Australian clients have a statutory right to written progress reports: Section 3.4.18 Legal Profession Act, 2004 (Vic), and see the other jurisdictions’ provisions below. That says:
‘A law practice must give a client, on reasonable request — (a) a written report of the progress of the matter in which the law practice is retained’.
Many clients would be well advised to exercise this right. A request might say:
‘Dear Madam,
I would be grateful if you would provide me with a written report of the progress of this matter, under s. 3.4.18 of the Legal Profession Act, 2004. In particular, I would be interested to know [specify].
Yours etc.’
The consequences for the lawyer of not complying are probably spelt out in s. 3.4.17, and are very significant: Continue reading “On the desirability of requesting a written progress report”
Letter of demand for fees found to be professional misconduct
A solicitor represented himself unsuccessfully before Western Australia’s State Administrative Tribunal in Legal Profession Complaints Committee v MLS [2010] WASAT 135, being found guilty of three counts of professional misconduct and three of unsatisfactory professional conduct. The Tribunal’s summary of its own findings is reproduced at the end of this post. The solicitor told a Magistrate on an ex parte application for an intervention order against his client that the client had a criminal record, which the solicitor knew the client did not have. Hardly surprising that that conduct was found to be misconduct. More interesting, perhaps, is the finding that an unduly aggressive demand for fees was found to amount to professional misconduct. It said, in effect — If you do not pay me $2,000, I will sue you, get default judgment, and bankrupt you for 5 years. The problem was that the client had a rather good defence: the solicitor had not sent him a bill for the $2,000 disbursement. The Tribunal found misconduct, explaining at [53]ff: Continue reading “Letter of demand for fees found to be professional misconduct”
Is this the Legal Practice List’s biggest case?
Virgtel Ltd v Gadens Lawyers [2010] VCAT 1584 might be VCAT’s Legal Practice List’s highest value case. Not all that long ago in the scheme of things, I remember learning that VCAT had certain jurisdictions which were unlimited, and realising that — shock! — it might hear cases which the Magistrates’ Court could not hear. Well, this case is an application pursuant to s. 103 of the Legal Practice Act, 1996 to set aside a costs agreement pursuant to which bills totalling $2.3 million were charged. That explains why two QCs faced off on a pre-trial application.
The respondents applied for summary dismissal under s. 75 of the VCAT Act, but advised the day before the hearing that they would withdraw it. The applicants sought costs of the application. Senior Member Howell granted that application, on a solicitor-client basis. That was because the application was misconceived. Its thesis was that there was no point making an order setting aside the costs agreement because all but one of the bills was out of time for taxation anyway. But it did not follow from the unavailability of taxation that the fees billed by the respondents could not be adjusted. As Senior Member Howell said: Continue reading “Is this the Legal Practice List’s biggest case?”