Androvitsaneas v Tartaglia and Associates
[2016] VSC 361
•24 June 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2015 02849
| JOHN ANDROVITSANEAS | Applicant |
| and | |
| TARTAGLIA & ASSOCIATES (A Firm) | Respondent |
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JUDGE: | GINNANE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 April 2016 |
DATE OF JUDGMENT: | 24 June 2016 |
CASE MAY BE CITED AS: | Androvitsaneas v Tartaglia & Associates |
MEDIUM NEUTRAL CITATION: | [2016] VSC 361 |
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COSTS – Legal practitioner’s bills – Review of bills – Discretionary considerations – Whether just and fair to extend time to review bills – Legal Profession Act 2004 s 3.4.38(6).
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr S L Freire | Boris Pogoriller Solicitor |
| For the Respondent | Mr P G Lovell | Tartaglia Lawyers |
HIS HONOUR:
The applicant, John Androvitsaneas is a former client of the respondent firm, Tartaglia & Associates, and seeks an extension of time in which to apply to the Costs Court for a review of the costs charged to him by the respondent.[1] He applied for that review by summons of 3 June 2015, but it was made beyond the 12 month time limit to make such applications. The applicant now seeks a determination pursuant to s 3.4.38(6) of the Legal Profession Act 2004 (‘the LPA’) that his application for review of solicitor/client costs be dealt with after the 12‑month period in which such an application can be made pursuant to s 3.4.38(5) of the LPA.
[1]The application was referred to the Practice Court by order made 3 February 2016.
Section 3.4.38(5) provides:
An application by a client or third party payer for a costs review… must be made within 12 months after –
(a)the bill was given or the request for payment was made to the client or third party payer; or
(b)the costs were paid and neither a bill was given nor a request was made.
To extend the time beyond the 12 months, the Court must determine:
After having regard to the delay and the reasons for the delay, that it is just and fair for the application for review to be dealt with after the 12 month period.[2]
[2]Section 3.4.38(6).
The respondent acted for the applicant from about June 2011 until 4 August 2014.
On his understanding, the applicant has paid the respondent $191,788.40 in costs for its fees and the fees of counsel in connection with litigation, although the respondent contends that $11,250.04 should be deducted from that sum.
The applicant’s summons for taxation seeks the assessment of costs claimed by the respondent ‘pursuant to the bills of costs rendered to the applicant in the period 16 June 2011 and 31 December 2014’.
The onus lies on the applicant to persuade the Court that the discretion should be exercised to extend the time for review of the costs.
Relevant principles relating to the exercise of the discretion
The principles applicable to the exercise of the discretion are not in dispute. They include the extent of the delay, the reasons for the for the delay[3], including the client’s knowledge of his or her rights, whether there is evidence that the bill may be excessive – this is relevant to whether the review would be futile – whether the client has paid the bill without demur and the reasons for the practitioner’s opposition to the extension of time including any prejudice to the practitioner.[4]
[3]The delay and the reasons for the delay are expressly referred to in s 3.4.38(6).
[4]See Mustafa v Velos [2012] VSC 133 (Whelan J).
In exercising the discretion, the Court should take into account the purpose of the disclosure and notification of rights provisions in the LPA, including the rights to receive a properly itemised bill.
The fixing of the time limit is relevant, it can only be extended if it is just and fair to do so. As Emerton J has stated:
There are good reasons why the legislation has imposed a 12 month time limit on making an application for costs review. Legal practitioners are entitled to organise their affairs on the basis that a review is unlikely if requested more than 12 months after the bill has been given.[5]
[5]Tomasevic v Nowicki Carbone [2015] VSC 302, [17] (Emerton J).
The issue of the consequences of the service of a bill that does not comply with statutory requirements is significant in this application.
Evidence
The parties relied on the affidavits that they filed. No deponent was cross-examined. The applicant relied on the affidavit of his current solicitor, Mr Boris Pogoriller, which in significant respects was based on information received from the applicant. The applicant also made an affidavit, which sought to confirm that paragraphs of Mr Pogoriller’s affidavit that related to his application were true and correct. The applicant was overseas when the application was filed. When I refer to the applicant as having performed some action or refer to details concerning the applicant, that information is most often found in Mr Pogoriller’s affidavit. The respondent relied on affidavits of Mr Sebastian Tartaglia and Mr Salvatore Tartaglia, who are legal practitioners and are members of the respondent firm. When I refer to Mr Tartaglia in this judgment, I will be referring to Mr Sebastian Tartaglia, as the evidence suggests that he was the legal practitioner principally acting for Mr Androvitsaneas. The respondent also relied on two affidavits of Mr William Gillies of counsel, who had been retained to represent the applicant. The affidavits conflicted in some important matters of fact.
Facts
Mr Androvitsaneas retained Tartaglia & Associates in about June 2011 in the following circumstances. He is a mortgage broker and formed an association with Members First Broker Network Pty Ltd (‘MFBN’). It authorised him to engage in specified credit activities on its behalf and in due course, he became a member of MFBN. But, in July 2011 MFBN terminated his membership and his status as a credit representative. He disputed the validity of the determination and commenced proceedings in the County Court. After a seven day hearing, he was unsuccessful and on 24 April 2012 the proceeding was dismissed and he was ordered to pay MFBN’s costs.[6] He brought an appeal to the Court of Appeal, but on 16 August 2013 it was dismissed and again he was ordered to pay MFBN’s costs.[7] MFBN only issued a summons in the Costs Court for taxation of the costs ordered in its favour on 10 June 2014.
[6]Androvitsaneas v Members First Broker Network [2012] VCC 406.
[7]Androvitsaneas v Members First Broker Network [2013] VSCA 212.
The respondent briefed Mr Gillies, as counsel on behalf of the applicant, in about October 2011 and the following month after the County Court proceeding had commenced, the respondent and the applicant entered into a costs agreement. The costs agreement was dated 7 November 2011 and at the same time the applicant was provided with a disclosure statement in purported compliance with s 3.4.9 of the LPA.
The evidence suggests that Mr Pogoriller commenced acting for the applicant in about August 2014. He represented the applicant in resolving the costs issues with MFBN. It is relevant to summarise Mr Pogoriller’s evidence of the steps that he took on behalf of the applicant after he was retained.
By August 2014, the applicant had engaged Mr R McKay as a costs consultant to prepare objections for the bill of costs served on him by MFBN’s solicitors. The cost dispute with MFBN was resolved in November 2014.
On 23 January 2015, Mr Pogoriller wrote to the respondent seeking copies of all invoices rendered to the applicant and an extract of the firm’s trust account ledger in relation to the applicant’s matters. He stated that on 2 February 2015, the respondent produced an extract of their trust account ledger but not copies of any invoices and advised that all invoices had already been provided to the applicant.
On 23 March 2015, Mr Pogoriller asked the respondent to provide a bill of costs in itemised form in respect of all fees and costs billed to the applicant in the course of the retainer. On 10 April 2015, the respondent replied stating that the time in which the applicant had the right to request itemised bills had ‘well and truly expired’ and as such they would not be providing any itemised bills for any matter. The letter concluded by stating that ‘[a]ll matters between your client and our firm are now at an end’.
Mr Pogoriller stated that following receipt of that letter, on instructions from the applicant, on 3 June 2015, he filed the summons for taxation of the respondent’s bills. In a letter to the respondent of 17 June 2015, accompanying the summons, he referred to alleged breaches of the LPA in respect of the bills and disclosure statements and invited the respondent to serve the bill in itemised form so that the costs consultant engaged by the applicant could review the costs in an attempt to resolve the matter, or at least narrow the items in dispute ahead of any taxation.
On 15 September 2015, upon the applicant’s application, Judicial Registrar Gourlay ordered that the respondent discover and produce to the applicant the respondent’s office account ledger in respect of all client matters for the applicant in the period 1 June 2011 to 31 August 2014.
On 16 September 2015, Mr Pogoriller served on the respondent a Notice to Admit Facts and a Notice to Admit Documents.
On 29 September 2015, the respondent served Notices of Objections to the applicant’s Notices to Admit and a copy of its office account ledger in respect of the applicant’s matters.
On 30 September 2015, Mr Pogoriller asked the respondent to provide the main office account ledger for the litigious matters conducted on behalf of the applicant in relation to the dispute with MFBN. On 5 October 2015, the respondent advised that it did not have any office account documents for the applicant other than the probate account ledger and that all disbursements in proceedings relating to the MFBN in dispute were paid directly from the firm’s trust accounts.
Disputed facts
An issue of disputed fact that is relevant to the exercise of the discretion is what he knew of his rights to review MFBN’s costs. The applicant’s evidence is that on 16 August 2013, after the Court of Appeal delivered judgment dismissing his appeal, he had a conversation in the street outside the Court of Appeal building, during which Mr Gillies told him that MFBN’s costs could be taxed in the Costs Court which might reduce the amount that he had to pay. Mr Gillies, in his first affidavit, confirmed that such a conversation occurred and stated that he ‘had a similar conversation with [the applicant] on a number of occasions afterwards to that effect’.
The respondent’s case was that the applicant was informed of his right to review MFBN’s costs of the County Court proceeding on about 8 May 2012. Mr Tartaglia stated that he and counsel concluded that MFBN’s claimed costs were reasonable and that in order to avoid any additional costs, the applicant agreed not to have those costs formally taxed or reviewed. Mr Tartaglia stated that the argument on costs was listed for hearing on 10 May 2012 and on the morning of the hearing, the applicant provided him and Mr Gillies with verbal instructions that he agreed not to have them taxed or reviewed. Mr Tartaglia’s file note of his conversation with the applicant on this issue recorded that:
Spoke to John.
Advised that costs seemed reasonable and that we could seek that be taxed but will lead to more costs and it seemed within the range and should consider accepting it.
Said I will chat with Bill and advise.
He said [he] would be guided by us but was thinking of seeking that be taxed.
The applicant denies that he spoke to Mr Tartaglia on 8 May 2012.
Another issue of disputed fact is whether the applicant ever requested itemised bills from the respondent. This issue is relevant to whether the applicant had accepted the reasonableness of the respondent’s bills and whether he had exercised rights provided to him by the LPA.[8] The applicant’s evidence was that in August 2013 he met Mr Tartaglia and asked him to liaise with MFBN’s solicitors about providing an itemised bill in respect of costs of the proceedings. According to the applicant, he asked for an itemised account in respect of the lump sum, but Mr Tartaglia said ‘we do not provide that’. The applicant said that he repeated his request for an itemised bill of legal costs in July 2014.
[8]Legal Profession Act 2004 (Vic), s 3.4.9(1)(b)(ii) (‘LPA’).
Mr Tartaglia disputed the applicant’s evidence of these requests for an itemised bill and said that no such request had been made until Mr Pogoriller’s letter of 23 March 2015, to which he replied on 10 April 2015 stating that the time to request itemised bills had expired.
Also relevant to the question of whether the applicant had accepted the reasonableness of the respondent’s bills was that he paid them. The respondent says he did so ‘without demur’. The applicant’s evidence was that in late July 2014, shortly before the Costs Court proceeding, presumably about the costs of the Court of Appeal proceeding, Mr Tartaglia provided an estimate of the costs of acting in the Costs Court proceeding and of the fees payable to a costs consultant. He also said that Mr Tartaglia advised him that the respondent would not provide an itemised bill to the applicant and required the applicant to pay all outstanding lump sum bills prior to taking any steps on his behalf in the Costs Court proceeding. On 30 July 2014, Mr Tartaglia emailed the applicant with information about the costs of the consultant and his fees for a hearing in the Costs Court and stated:
Please note that the above is conditional, however, upon full payment of our prior outstanding account prior to undertaking any work in this matter. I appreciate and do understand your previous advices that you will be in a position to attend to the outstanding balance in a few months or so, however, I feel that we have been more than accommodating in this regard, particularly as we have significantly reduced our fees during your matter and now seek that full payment be made prior to commencing work in your costs matter. (emphasis in original)
The applicant replied:
Thank you for looking into this for me.
Unfortunately the conditions of full payment of all money prior to commencement makes it impossible for me to proceed as I will not be earning the required funds until end of August.
I understand that you have been very accommodating in your extension of terms, and I have tried to deal with my commitments the best I could.
As previously advised I will be able to settle this account at the end of August.
Later that day, the applicant informed Mr Tartaglia that he could advise the other side that he was no longer acting for him. He said that he had not yet decided if he would act on his own behalf.
Statutory obligations regarding costs disclosure
Section 3.4.9 of the LPA imposes an obligation on law practices to make disclosures of costs to clients. Matters which must be disclosed include:
(a) the client’s right to receive a bill from the law practice[9] and to request an itemised bill within 30 days after receipt of a lump sum bill;[10] and
(b) avenues open to the client in the event of a dispute in relation to legal costs including seeking a costs review under Division 7;[11] the setting aside of a costs agreement under section 3.4.32;[12] making a complaint;[13] and advising of any time limits that apply to the taking of any such action.[14]
[9]LPA s 3.4.9(1)(b)(ia).
[10]LPA s 3.4.9(1)(b)(ii).
[11]LPA s 3.4.9(1)(j)(i).
[12]LPA s 3.4.9(1)(j)(ii).
[13]LPA s.4.9(1)(j)(iii).
[14]LPA s 3.4.9(1)(k).
Disclosure must be made in writing before, or as soon as practicable after, the law practice is retained in the matter.[15] The consequences of a failure to disclose are set out in s 3.4.17 and include:
[15]LPA s 3.4.11(1).
(a) the client need not pay the legal costs, unless they have been reviewed under Division 7;[16]
(b) on a review of the legal costs, the amount of costs may be reduced by an amount considered by the Costs Court to be proportionate to the seriousness of the failure to disclose;[17] and
(c) non‑compliance is capable of constituting unsatisfactory professional conduct or professional misconduct.[18]
[16]LPA s 3.4.17(1).
[17]LPA s 3.4.17(4).
[18]LPA s 3.4.17(6).
All bills, with exceptions not presently relevant,[19] must include or be accompanied by a written statement setting out the avenues open to the client in the event of a dispute in relation to legal costs,[20] and any time limits that apply to the taking of any such action.[21]
[19]LPA s 3.4.35(2); bills to ‘sophisticated clients’, as defined in s 3.4.2, are excepted.
[20]LPA s 3.4.35(1)(a).
[21]LPA s 3.4.35(1)(b).
The disclosure documents provided to the applicant
In November 2011, after the applicant had commenced the County Court proceeding, the respondent provided him with the first of four documents purporting to comply with its costs disclosure obligations under the LPA. There were four such disclosure documents apparently provided on 7 November 2011, 20 January 2012,[22] 3 February 2012 and 3 May 2012.
[22]It is dated under the applicant’s signature as 20/1/2011, but the context suggests that the year stated was in error and should have been 2012.
The first was a costs agreement signed 7 November 2011 and a disclosure statement which was described in its heading as ‘Pursuant to Section 3.4.9 of Legal Profession Act 2004 For Non-Litigious Matters’. Under the heading ‘Your rights’, the costs agreement stated that:
You may request an itemised bill within 30 days after receipt of a lump sum bill
An itemised bill of costs will be given on your request made within thirty (30) days after receipt of a lump sum bill of costs.
Under the heading ‘Our estimated legal costs Section 3.4.9 (1)(c)’ the disclosure statement stated:
This estimate is not binding on us as the work required may change. It is required to be given to you by the Act and is based on our understanding of the present circumstances. If this estimate or the scope of work changes, we may need to revise this estimate.
It is not reasonably practicable to estimate the total legal costs and a range of estimates of the total legal costs is between $15,000.00-$30,000.00. The major variables that will affect the calculation of these costs are length of the proceedings, negotiations and the likelihood of an early resolution of the matter.
Under the heading ‘If you have a concern about our legal costs Section 3.4.9(1)(i), (j) & (k), the document stated:
If you have any concern about our legal costs, or our legal services, please do not hesitate to speak to SEBASTIAN TARTAGLIA. If we cannot satisfactorily resolve our concern with you, you may:
·Seek a costs review by the Taxing Master under Division 7 of Part 3.4 of the Legal Profession Act 2004 (‘the Act’) within 60 days after the bill is given to you or the law practice requests payment of costs or you pay costs.
·Apply to VCAT to set aside this agreement under section 3.4.32 of the Act; or
·Make a complaint to the Legal Services Commissioner under chapter 4 of the Act within 60 days after the legal costs were payable or, if an itemised bill was requested in respect of those costs, within 30 days after the request was complied with.
The other disclosure statements were in similar terms except that they increased the estimate of costs.
Description of the eight bills
The respondent delivered eight documents purported to be lump sum bills to the applicant, the last of which was dated 5 June 2013.
Mr Pogoriller stated that, during the course of the retainer, the respondent served eight documents which purported to be its bills of costs and which totalled $191,788.40, including counsel’s fees. He exhibited a number of documents as constituting the eight bills. Some bills were accompanied by a written notice of withdrawal of trust moneys.
The documents said to be Bill No 1 were dated 30 August 2011 and included a bill giving a general description of work and the fees charged and disbursements totalling $2,640 and a Tax Invoice for that amount. Bill No 2 was a Tax Invoice dated 8 September 2011 describing work performed and stating the amount due and payable as $7,500.
Mr Tartaglia stated that he did not recall sending bills 1 and 2 to the applicant, but that if he did, the respondent sought only the payment of $8,800 for solicitor’s fees up to 20 December 2011 and not $17,500 being the total of solicitor’s fees of the first 3 bills.
Bill No 3 was also a Tax Invoice, which was not dated, but which appears to have been sent on or after 20 December 2011 and which recorded payments made by Mr Androvitsaneas of $22,991.50 and an additional $900 due and payable. It contained an entry stating:
To our costs
(as of 20th December 2011) $8,000.00
Plus GST $800.00
No further description of the work was given.
Bill No 4 was headed Tax Invoice and was undated. It claimed $38,006.15 as due and payable to the respondent. That bill was also a statement of monies received and expended, including previous transactions, but also included a claim of costs expressed as follows:
To our costs
(21/12/2011 - 8/02/2012) $30,000.00
BUT SAY $23,500.00
Plus GST $2,350.00 $25,850.00
Bill No 5 was dated 30 July 2012 and claimed the amount of $41,669.16 as due and payable to the respondent, including costs for ‘(24/04/2012 – Judgement) of $1,000.00, BUT SAY NIL’.
Bill No 6 was dated 6 August 2012 and claimed the amount of $12,036.70, including $5,500 for the respondent’s fees and disbursements totalling $6536.70, including counsel’s fees. It contained a general description of work associated with preparation for the appeal.
Bill No 7 was undated and was for costs, charges and expenses for the period 6 August 2012 – 3 December 2012. It described in general terms work performed in connection with the appeal and then claimed as due and payable the sum of $13,352.70.
Bill No 8 was also a statement of monies received and expended and a notice of withdrawal of trust moneys. Under the heading ‘To our professional fees period 3 December 2012 – 23rd April 2013’, it described in general terms work performed in connection with the appeal, claiming the a further sum due of $19,250.
The applicant’s case and submissions
Mr Androvitsaneas’ case was based in important respects on the failure of the respondent firm to comply with the disclosure obligations required by the LPA and the absence of the notification of his rights from the respondent’s bills.
His case, in more detail was as follows. First, the disclosure statements provided to him stated that, in the event that he had a concern about the legal costs he could seek a costs review within 60 days after the bill was given to him. However, that time was incorrect, because on 8 May 2007, the time was extended to a period of one year.[23] There were erroneous statements to that effect in each of the disclosure statements.
[23]LPA s 3.4.38(5).
Secondly, contrary to s 3.4.35 of the LPA, none of the firm’s lump sum bills included, or was accompanied by, a written statement setting out the avenues open to the applicant in the event of a dispute in relation to legal costs, or any time limits to doing so. In addition, the lump sum bills that were provided to the applicant were not of sufficient particularity or clarity to comply with the definition of ‘lump sum bill’ in the LPA, that is:
A bill that describes the legal services to which it relates and specifies the total amount of the legal costs.[24]
[24]LPA s 3.4.2.
The disclosures did not refer to the client’s right to request an itemised bill. The disclosures state, correctly, that such a request must be made within 30 days after the arrival of a lump sum bill, but then state, incorrectly, that the request must be made within 28 days. Section 3.4.9(1)(b)(ii) requires that the law practice disclose to a client that he or she has the right to request an itemised bill within 30 days after receipt of a lump sum bill.
Thirdly, the disclosure statements did not comply in material respects with the disclosure requirements set out in Part 3.4, Division 3 of the LPA. In particular:
(a) contrary to ss 3.4.9(1)(g)(i), the firm did not provide an estimate of the range of costs that might have been recoverable from MFBN if the applicant had been successful in the litigation; and
(b) contrary to s 3.4.9(1)(g)(ii), the firm did not provide an estimate of the range of costs the applicant might be ordered to pay MFBN if he was unsuccessful.
Fourthly, the applicant contended that the respondent firm did not comply with its statutory obligations to disclose matters relating to the retainer of counsel. He alleged that:
(a) contrary to ss 3.4.10(1), 3.4.9(1)(a) and 3.4.11, the firm did not disclose to the applicant in writing the basis upon which counsel’s costs were to be calculated, including whether a practitioner remuneration order or a scale of costs applied to such costs, or whether the firm had entered into a costs agreement with counsel in respect of the County Court proceeding and/or the appeal proceeding;
(b) contrary to ss 3.4.10(1), 3.4.9(1)(c) and 3.4.11, the firm did not disclose to the applicant in writing an estimate of the total legal costs, or if that were not reasonably practicable, a range of estimates of the total legal costs, payable to counsel; and
(c) contrary to ss 3.4.10(1), 3.4.9(1)(e) and 3.4.11, the firm did not disclose to the applicant in writing details of the intervals (if any) at which the applicant would be billed in respect of counsel’s costs.
Some of the bills provided to the applicant did not include any description of the work performed whatsoever. This was the case with bills 3, 4 and 5. For example the fourth bill, after recording various disbursement merely stated: ‘To our costs $8,800’.
Justice McDonald said of lump sum bills in Stevens v Keogh:[25]
The fact that a bill of costs may be drawn in a lump sum as distinct from in taxable form does not alter the requirement that the bill must contain sufficient details to inform the client of the work performed, the subject of the bill, sufficient to enable those acting for him to advise him whether a bill drawn in taxable form should be requested.
[25]Unreported, Supreme Court of Victoria, McDonald J, 3 December 1996, 10-11.
The applicant submitted that the respondent firm resisted verbal requests for the delivery of an itemised bill. A solicitor should be willing to subject accounts to taxation when requested by the client.
The applicant explained his delay in applying to review the costs on the following factors. He had not previously been a party to commercial litigation. He remained a client of the firm until 4 August 2014. Thereafter, for much of 2014 he was occupied with resolving proceedings in the Costs Court about the amount of the costs that he had to pay MFBN. Only in December 2014, when he obtained independent advice from a costs consultant, Mr R McKay and from his new solicitor was he informed of his statutory rights in relation to legal costs charged to him by the respondent.
Mr Pogoriller stated in his affidavit that the applicant had informed him and he believed that:
[he] felt that he was not in a position to challenge the quantum of the respondent’s costs whilst MFBN’s costs dispute remained unresolved and the respondent continued to act for him.
The applicant lacked understanding of his statutory rights to obtain a costs review. The blame for that lay on the respondent firm.
The applicant submitted that in the absence of an itemised account for the costs charged by the firm, there was a prima facie case that the bills were excessive.
The reference to the evidence of a costs consultant was expanded on by Mr Pogoriller. In his affidavit, he stated that he had been informed by Mr McKay of RMC Legal Costing and believed that:
Allowing reasonable time for the reading of the transcript, research and preparation of submissions in the appeal, the cost of $27,170.00 claimed by counsel, who had conducted the applicant’s case at trial appeared to be manifestly excessive.
The respondent objected to this evidence and as no admissible evidence from Mr McKay was before the Court, I pay no regard to it.
The applicant submitted that there was no real prejudice to the firm as a result of a review. They had not explained their opposition to the applicant’s requests other than their reliance on the statutory time limit. The firm had not identified any real prejudice that it would suffer if the application were granted.
The respondent’s case and submissions
The respondent firm conceded that it did not comply with the disclosure requirements regarding the applicant’s cost review rights and said that that was because of an ‘error and oversight’ on its part. The costs disclosure statements were in a form that were appropriate for non‑litigious, rather than litigious matters. It has since altered its practices so as to comply with the statutory requirements.
Though it was conceded that none of the bills included any written ‘notification of rights’, it was submitted that the applicant was well aware of his rights and the possible cost consequences by virtue of the disclosure statements and the following information that had been given to him verbally. First there was the conversation of 8 May 2012 where, as Mr Tartaglia deposed, the question of reviewing MFBN’s claim of costs at the County Court trial on a party-party basis was discussed.
On 25 July 2011, Mr Gillies of counsel emailed Mr Salvatore Tartaglia, while Mr Sebastian Tartaglia was on holidays, suggesting that they meet with the applicant in order to impress on him the risks attached to possible litigation. They held a conference with the applicant on 27 July 2011. Mr Salvatore Tartgalia’s note of the conference includes that:
The proceedings were discussed generally and John was made aware of the costs- told him that the cost of litigation b/w $75k plus.
discussed & informed John of costs consequences – if John lost or unsuccessful he would be liable to pay members costs which could amount to $75k($75000.00).
John was advised of the uncertainty of the litigation process.
…
Bill advised John to have a think about the matter and advise by Friday whether he wants to proceed.
On 28 July 2011 Mr Gillies emailed the applicant his thoughts on his litigation options and about the approximate time the proceeding would take and its cost.
Mr Tartaglia stated that during a mediation of the substantive proceeding on 22 December 2011, he conferred with counsel and the applicant in relation to the costs of the proceeding and discussed the costs consequences for him should the matter proceed to trial and he were unsuccessful. He told the applicant that he would have to pay the MFBN’s party-party costs, which could be anywhere in the vicinity of $60,000 to $100,000.
Mr Tartaglia stated that following the delivery of the County Court judgment on 24 April 2012 he discussed with the applicant the prospects of an appeal. The discussion included the likely cost of an appeal to the Court of Appeal, which he estimated to be in the vicinity of $40,000 to $60,000. He told the applicant that in addition, if the appeal were dismissed, he would be liable for MFBN’s costs of the County Court and appeal proceedings which could be $40,000 to $60,000 if not higher. The total cost could therefore be $120,000 or more. In further discussions on 4 May 2012, he suggested that the applicant have a good think about proceeding with the appeal.
The applicant denied that he had had the conversations of 28 July 2011, 22 December 2011 or 8 May 2012 on which the respondent relies.
The respondent conceded that, save in one instance, the bills did not contain or were accompanied by any formal or embedded ‘notification of rights’. But, it submitted that the notification of rights obligations under s 3.4.35 do not necessarily require the provision of information about time limits, because a form, D4 ‘Form of Notification of Client’s Rights’ which bears the subheading ‘Your rights in relation to legal costs’ may be provided under reg 3.4.5 of the Legal Profession Regulations 2005 pursuant to s 3.4.35(3) of the LPA. That particular form does not contain information about time limits. The form includes the following statements:
Time limits apply to the avenues for resolving costs disputes.
For more information about your rights, please read the fact sheet titled Your right to challenge legal costs. You can ask for a copy, or obtain it from the Legal Services Commissioner (or download it from their website).
Mr Tartaglia stated that he recalled providing the applicant with a notification of rights for one of the bills sent to him ‘in the early stages of the County Court proceeding’. However, he could not provide a copy of that bill. I cannot place any weight on that evidence. There was no other evidence that this ‘Form of Notification of Client Rights’ was ever provided to the applicant.
The respondent emphasised the length of delay in seeking a review of the last bill, which invoiced ongoing legal costs and was sent to the applicant on 26 April 2013, more than two years before the summons for taxation was filed on 3 June 2015.
The respondent submitted that the applicant’s reasons for delay were disingenuous in that the four costs disclosures provided by the firm advised the applicant of his rights to request a review of his costs independently. That the time-limit advised was incorrectly stated as 60 days and not 12 months was immaterial as the applicant only took steps to review the costs nearly two years after the last bill had been provided to him.
It was put that the applicant, before bringing this application, had never requested an itemised bill despite at various times being advised that he could seek one and that any refusal to provide one should not be interpreted as ‘self-preservation or evasion’.
While the respondent’s written costs estimates were lower than the total amount of legal costs, they were estimates. Mr Tartaglia and Mr Gillies deposed to the giving of the verbal costs estimates. The costs were not excessive. There were clear errors in the applicant’s evidence.
The respondent said that it would be prejudiced if the time to review its bill was extended. The applicant had paid all the firm’s bills and the fees had been spent on the firm’s overheads. The applicant had taken advantage of the respondent’s voluntary discounts of its legal costs given him from time-to-time and generous payment terms.
The respondent submitted that there was no dispute over the level or propriety of counsel’s fees. Estimates of counsel’s fees were provided to the applicant at regular intervals, and though the respondent conceded that many of these were not in writing, the affidavit evidence of the solicitors and counsel that those estimates been given verbally ought be accepted. Counsel’s fee slips were appropriately detailed in the context of the legal services for which he was briefed.
Mr Gillies stated that he was able to identify 42 hours of work that he performed associated with the appeal, which did not include some administrative duties such as photocopying authorities. He said that the applicant was a very hands on and labour intensive client. It is unclear whether counsel’s fee invoices were provided to the applicant.
There was no evidence that the bills were excessive and no such inference could be made. The hearsay evidence of the costs consultant should not be accepted. Finally, it was said that whereas the applicant would suffer no prejudice from this action, any order to provide an itemised account would be at the respondent’s expense and would thus prejudice them.
Mr Tartaglia stated he had a friendly business and social relationship with the applicant for three years or so prior to the proceeding. The applicant thanked him for discounts to legal costs and generous payment terms, but at no stage did he ever request or require an itemised account. He raised no objection to the bills. Mr Tartaglia believed that the provision of the file was used by the applicant’s current solicitor to attack the respondent’s costs. The respondent submitted that the applicant was an experienced mortgage broker and business person and was extremely diligent. He believed he understood the costs review process. The respondent submitted that all of the bills had been paid without demur, and though that did not affect the applicant’s rights, it could be inferred that at the time the bills were given the applicant saw no issue with them. In all the circumstances, it would not be just and fair to allow an extension of time.
Analysis
The extension of time that the applicant seeks is extensive. 3 years and 10 months elapsed before the application for review was filed, or 2 years and 10 months outside the time fixed for review by s 3.4.38(5) the LPA. The applicant is seeking to review each of the bills. The 12 month time period has been running in respect of each of the bills after each was given to the applicant. However, the parties’ submissions were directed at the bills as a group and I consider that to be appropriate, as they all related to lengthy litigation.
The applicant contends that he felt that he was not in a position to challenge the quantum of the respondent’s costs while the MFBN’s costs dispute remained unresolved and the respondent continued to act for him.
The respondent failed to comply with significant notification requirements of the LPA in respect of the disclosure documents and the bills. The bills did not explain the avenue for disputing fees. Bills 3, 4 and 5 were not even lump sum bills.
The LPA disclosure requirements are important provisions intended to provide protection to clients of legal practices.
The respondent’s failed to itemise properly counsel’s fees and possible cost liabilities in the proceeding. Although there is evidence that these matters were explained in conference by counsel, and by the solicitor, and by email from counsel, that is not the form of disclosure required by the LPA.
I do not consider that advice about the right to review MFBN’s costs can equate to information to a client about the right to review his solicitor’s fees. The client’s rights to receive written notice of his or her rights concerning their practitioner’s costs are given by the LPA. They are statutory rights and the client is to be notified of them in writing. They are not lost because the client has been told in conversations of other rights, such as the right to challenge the opponents costs.
There is a conflict of evidence about whether the applicant did seek an itemised bill before Mr Pogoriller’s request in 2015. There was no cross-examination of witnesses and I could not be satisfied that the applicant did make such a request. It is also the case that the applicant appears not to have disputed the fees that were billed and appears to have received favourable terms for payment from the respondent.
However, in my opinion, the important aspect of the breach of the LPA requirements for present purposes, is the failure to inform the applicant accurately of his right to review the bills. The bills did not state that he had that right of review. The disclosure statements did inform him of the right of review, but gave the wrong time available to exercise that right. In any event, the LPA requires that the client be informed in writing of the review right each time a bill is sent. This right is particularly important in lengthy litigation, the scope and costs of which will invariably increase.
In addition, a number of the bills gave the applicant next to no information about the work for which the fees had been charged. Some of them may not have been easy to understand as they contain a reconciliation of previous payments as well as a demand for further payments.
The applicant and Mr Tartaglia had a good relationship over a number of years. The respondent states that it discounted the fees that it charged him and there is evidence that it allowed him additional time for payment. The respondent will suffer prejudice in one sense if the time to review costs is extended. However, with 12 months in which a review can be commenced, it is always likely that fees paid will be spent before a review is initiated or completed. It may be that the respondent will be required to repay costs or fees already expended and will incur the costs of the review. Counsel’s fees may also be affected. But, the respondent’s failure to comply with the requirements of the LPA will have contributed to the circumstances that persuade the Court to extend the time for review.
The amount of preparation charged by counsel for the appeal was challenged. The bills were paid ‘without demur’, but the ongoing litigation may explain that. I am not able to conclude that there is evidence that the bills were either excessive or not excessive. Therefore, I cannot conclude that a review would be futile.
In exercising the relevant discretion, I consider that the failure of the respondent to comply with the provisions of the LPA is of particular significance. The combination of the lack of detail in the bills and the failure of the bills to inform the applicant of his right to review the bills is important. All eight bills suffered from these omissions.
The delay is significant, but it is in the context of ongoing litigation. I am not persuaded that the applicant has deliberately delayed in bringing the application. The application was brought reasonably promptly after he engaged a new lawyer. The applicant’s work as a mortgage broker is relevant, he had not been a party to commercial litigation before.
While his new solicitor might have issued a taxation summons seeking an extension of time soon after he was engaged, it was clear once he commenced writing letters in January 2015 seeking information from the respondent, that the bills may be challenged. It was reasonable for the applicant’s new solicitor to make the enquiries that he did.
Conclusion
On balance, I consider that the applicant has established that the appropriate exercise of the discretion is to extend the time as the applicant requests. I consider that it to be just and fair to do so.
I therefore determine under s 3.4.38(6) that it is just and fair for the applicant’s application for review of costs contained in his summons filed 3 June 2015 to be dealt with after the 12 month period provided for in s 3. 4.38(5).
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