Ben Aulich and Associates Pty Ltd v Jackson
[2017] ACTMC 21
•23 November 2017
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: Citation: | Ben Aulich & Associates Pty Ltd v Jackson [2017] ACTMC 21 |
| Hearing Date: | 31 August 2017 |
| DecisionDate: | 23 November 2017 |
| Before: | Magistrate Morrison |
Decision: Catchwords: | See paragraph [46] CIVIL LAW –– statutory interpretation – right to recover legal costs under Legal Profession Act 2006 (ACT) – effect of amendment of s304 of LPA – proper approach to construction of remedial legislation – effect of non-compliance with s277 of LPA – temporary stay ordered. |
Legislation Cited: | Justice and Community Safety Legislation Amendment Bill 2016. |
Cases Cited: | Berowra Holdings Pty Limited v Gordon [2006] HCA 32; 225 CLR 364; 80 ALJR 1214; 228 ALR 387. Emanuele v Australian Securities Commission [1997] HCA 20; (1997) 188 CLR 114; 71 ALJR 717; 144 ALR 359. IW v City of Perth [1997] HCA 30; 191 CLR 1; 71 ALJR 943; 146 ALR 69. Maxwell v Murphy (1957) 96 CLR 261. Nichol and Co Pty Ltd v Turner and Another [2015] ACTSC 42. Nilant v Macchia [2000] FCA 1528. Racic v Haltiner (2010) 4 ACTLR 224. |
Parties: | Gary Jackson (Applicant) |
| Representation: | Counsel Solicitors |
| File Number: | CS 305 of 2016 |
MAGISTRATE MORRISON:
At the heart of the contest before me is a dispute about legal costs. The applicant is a former client of the respondent. The right of a law practice to recover costs is regulated by the terms of the agreement with the client and the provisions of the Legal Profession Act 2006 (“LPA”).
The outcome of this application turns on the construction of sections 277 and 304 of the LPA. It is convenient to start these reasons with an analysis of the proper construction of section 304 of the LPA. The section was amended in 2016.
In its pre-amended form the section read:
(1) Despite anything to the contrary in this part, legal costs that are or have been the subject of a consumer dispute under chapter 4 (Complaints and discipline) must not be the subject of a costs assessment under this division.
(2) This section is subject to section 409 (Referral of matters for costs assessment—complaint investigation).
The effect of section 304, in its pre-amendment form and in the context of sections 277 and 298 of the LPA, is the subject of the decision of Master Mossop (as His Honour then was) in Nichol and Co Pty Ltd v Turner and Another [2015] ACTSC 42 (Nichol and Co). His Honour construed the relevant provisions of the LPA in a way which he acknowledged may produce an anomalous result.
For present purposes, the relevant effect of His Honour’s decision in Nichol and Co, is adequately set out in the headnote to His Honour’s published reasons in these terms:
(3) The position is:
(i)If an application for costs assessment is made then proceedings may not be started to recover the legal costs until that process is completed: s 298.
(ii)If a complaint is or has been made then an application for cost assessment cannot be made and an assessment cannot be completed: s 304.
(iii)There is no statutory restriction on proceedings being commenced to recover costs merely by reason of the existence of a complaint.
(iv)Thus, the making of a complaint protects the client by preventing the solicitor from applying for costs to be assessed but not from the lawyer commencing proceedings to recover costs relying on the costs agreement in the same way as any other contract: s 286(1).
(v)However, the proceedings may be ineffective to recover costs if there has been a failure to disclose anything required by Div 3.2.3 of the Act: s 277.
(vi)If s 277 applies then costs can only be recoverable if they have been assessed under Div 3.2.7.
(vii)However, assessment under Div 3.2.7 is not available if there has been a complaint or a complaint is on foot.
(4)(i) An anomalous position may result for a legal practitioner to be unable to recover any costs in circumstances where a complaint about those costs has been made to the Law Society and dismissed without a referral for assessment under s 409, and there has been some non-compliance with Div 3.2.3 of the Act which would prevent an entitlement to sue on a costs agreement.
It is common ground that section 304 was amended following the decision in Nichol and Co to address what His Honour described as the anomalous position which may result if a complaint is made to the Law Society and dismissed without referral for a costs assessment. So much is clear from the extract of the explanatory statement accompanying the Justice and Community Safety Legislation Amendment Bill 2016 which is set out in the applicant’s written submissions.
The amendment to section 304 added a new subsection in the following terms:
(2) Subsection (1) does not apply –
(a) to the extent that the relevant council for the legal practitioner—
(i)is unable to resolve the costs dispute and has notified the parties of their entitlement to apply for a costs assessment; or
(ii)refers a matter to the Supreme Court for a costs assessment under section 409 (Referral of matters for costs assessment—complaint investigation); or
(b) if the costs dispute is withdrawn in accordance with section 400.
The chronology of relevant events in the contest before me is this:
a. April 2014 – the applicant instructs the respondent to act for him in criminal proceedings;
b. 2015 – a dispute arises about payment of respondent’s costs;
c. 11 March 2016 – applicant’s complaint about the respondent put before Law Society;
d. 28 April 2016 – respondent commences proceedings by way of originating claim for recovery of costs;
e. 22 June 2016 – amendment to section 304 commences;
f. 04 August 2016 – applicant’s complaint dismissed and applicant advised of right to apply for costs assessment.
In the course of hearing oral submissions I raised a question as to the possible retrospective operation of the amendment to section 304 and invited further written submissions limited to that point. Additional written submissions were filed.
The respondent does not argue that the pre-requisites for the operation of what appears in section 304(2) are not triggered but rather says simply that the section as amended does not have any retrospective operation.
For his part, the applicant also submits that the section does not have retrospective operation – but rather he argues that it does not have to be construed as doing so in order to have effect in the circumstances before me.
As I understand the respondents argument it is this:
a. The amendment introduces what is in effect an application provision – saying that the substantive part of section 304, that is subsection 1, does not apply in the circumstances set out in subsection 2.
b. The circumstances set out in subsection 2 are met, and were met only after, the application provision came into effect – that is after 22 June 2016 – such that the section applies to the facts before me without requiring a conclusion as to retrospective effect.
The applicant’s submissions do not directly respond to the line of argument by the respondent just referred to – instead pressing again that the section simply does not have retrospective effect. I see that the respondent’s line of argument was raised, somewhat tangentially, in the oral submissions of Mr Buckland of counsel in the argument before me on 31 August 2017.
The argument contrary to the respondent’s submission is that the amendment necessarily affects what are otherwise the parties’ pre-amendment rights and liabilities such that it has retrospective effect regardless of the timing of the circumstances triggering its application.
What is to be made of the submission by the respondent?
Given the approach taken by both parties I did not receive detailed submissions from either of them on the question of whether section 304 is properly regarded as a procedural provision and the potential significance of that to how the section is to be construed.
In addition, and somewhat surprisingly, neither the applicant nor respondent made any submissions specifically directed to construing legislation which is remedial in nature.
The background to the amendment of section 304 by way of the introduction of subsection (2) makes clear that the amendment was always intended to be remedial in nature. In effect the legislature acknowledged the risk of an unintended unjust outcome (as identified in Nichol and Co) from the application of section 304 without the amendment.
Some special considerations apply to the construction of legislation properly categorised as remedial (or beneficial).
The LPA as a whole is not remedial (or beneficial) legislation. Individual provisions in legislation that is not as a whole remedial may nevertheless have that purpose and must be interpreted accordingly – see Nilant v Macchia [2000] FCA 1528.
The approach to be taken to construction was described by Brennan CJ and McHugh J in IW v City of Perth [1997] HCA 30 in these terms:
… beneficial and remedial legislation, like the [Equal Opportunity] Act, is to be given a liberal construction. It is to be given ‘a fair, large and liberal’ interpretation rather than one which is ‘literal or technical’. Nevertheless, the task remains one of statutory construction. Although a provision of the Act must be given a liberal and beneficial construction, a court or tribunal is not at liberty to give it a construction that is unreasonable or unnatural.
In considering the proper construction of section 304 in its amended form I am also mindful of the principle (usually applied in consideration of the retrospective operation of a statute dealing with procedural matters) that if an amendment would revive a cause of action that was otherwise barred it should not be read as acting retrospectively in the absence of clear contrary intention. See Maxwell v Murphy (1957) 96 CLR 261 at 277-278.
The issue of any effect by way of revival of a cause of action in the present case calls for careful consideration. Two observations can be made.
The first is that section 304 does not purport to permit or bar enforcement of a cause of action. That it may have an equivalent practical effect, given the decision in Nichol and Co, is the very injustice intended to be overcome by the 2016 amendment.
The second is that the effect of section 304 in its post amendment form is to allow for the suspension and revival of rights in the ordinary operation of the clause in any event. By way of example, a lawyer seeking to recover costs from a client might properly seek a costs assessment under division 3.2.7. If the client subsequently takes action by way of complaint to the Law Society the decision in Nichol and Co dictates that the costs are thereby “the subject of a consumer dispute” for the purposes of section 304(1). The costs assessment cannot then proceed, and indeed may never be able to proceed if the circumstances in section 304(2)(a) or 304(2)(b) do not come to pass. If however those circumstances do come to pass, then the lawyer’s right to proceed with the costs assessment is thereby “revived”.
The language in section 304 in its amended form is such that it is capable of being construed in either the manner pressed for by the applicant or in the manner pressed for by the respondent. The construction pressed for by the respondent is neither unreasonable nor unnatural. Against the background of the clearly remedial nature of the amending Act it should be given the construction pressed for by the respondent.
I turn now to the argument in relation to section 277.
Section 277(2) is in these terms:
(2) A law practice that does not disclose to a client or an associated third party payer anything required by this division to be disclosed may not bring a proceeding against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been assessed under division 3.2.7.
It is conceded by the respondent that it did not make the disclosure referred to in the section. I invited written submissions on the effect of that non-disclosure against the background of decisions such as that of Master Harper in Racic v Haltiner (2010) 4 ACTLR 224.
The applicant submits that section 277 is, on its proper construction, substantive and not procedural, such that the proceedings commenced by the respondent are a nullity.
The respondent submits that Master Harper’s decision in Racic is apposite and that the same considerations should apply on the facts before me and should result in the same conclusion.
The applicant’s argument seeks to distinguish the decision in Racic on two bases.
The first is that “the section is unmistakably clear. It directs that when a law practice does not disclose to a client anything required to be disclosed the law practice may not bring a proceeding against a client unless costs have been assessed under division 3.2.7.”
The submission misses the point somewhat. The question is not one of what the section unmistakeably says but rather what are the consequences of non-compliance with it. The “direction” in s277 is not materially different to what was the subject of the decisions in several of the authorities dealing with pre-litigation-commencement legislative requirements – see Racic; Emanuele v Australian Securities Commission [1997] HCA 20; Berowra Holdings Pty Limited v Gordon [2006] HCA 32.
The second argument pressed by the applicant, as I understand it, is that the relevant provision is substantive and not procedural. The applicant says that neither s277 nor the LPA itself purports to regulate “the conduct of the court proceedings” and nor are they part of the “mechanism or machinery of litigation”. The applicant says that s277 is substantive and wholly comparable to a limitation period under the Limitation Act 1985, such that proceedings commenced contrary to it cannot proceed.
The applicant’s argument must be rejected.
The purpose of the LPA is expressed to be the regulation of legal practice and “the protection of consumers of the services of the legal profession”. The provisions of part 3.2 are clearly directed to the latter. The purposes of Part 3.2 are expressed to be:
(a) to provide for law practices to make disclosures to clients about legal costs;
(b) to regulate the making of costs agreements in relation to legal services, including conditional costs agreements;
(c) to regulate the billing of costs for legal services;
(d) to provide a mechanism for the assessment of legal costs and the setting aside of certain costs agreements.
Division 3.2.4 gives some primacy to contract arrangements entered into between a law practice and a client. Section 279, in dealing with the basis upon which legal costs are recoverable, states that “legal costs are recoverable—
(a) under a costs agreement made in accordance with division 3.2.5 or the corresponding provisions of a corresponding law; or
(b) if paragraph (a) does not apply—in accordance with an applicable scale of costs; or
(c) if neither paragraph (a) nor (b) applies—according to the fair and reasonable value of the legal services.”
The provisions of division 3.2.5 (referred to in (a) above) are directed towards requirements about agreements being in writing, conditional agreements, uplift and contingency fees and the like. Notably the disclosure requirements (not met in the present case) do not fall within division 3.2.5. It follows that the Act acknowledges that legal costs can be recovered under a costs agreement (which meets the division 3.2.5 requirements) despite non-disclosure under division 3.2.3.
It is section 269 of the Act (in division 3.2.3) which requires disclosure of certain things to the client and section 271 which governs how and when that disclosure is to be made.
Putting aside as irrelevant for present purposes circumstances involving one law practice engaging another, section 277 goes on to provide for certain consequences in the event of the required disclosure not being made. In summary they are:
a.the client need not pay legal costs until they are assessed under division 3.2.7; (section 277(1))
b.the law practice may not bring recovery proceedings until the costs have been so assessed (section 277(2));
c.the client may apply to have the costs agreement set aside (section 277(3)); and
d.the amount of the costs may on assessment by the Supreme Court be reduced by an amount considered by the Supreme Court to be proportionate to the seriousness of the failure to disclose (section 277(4)).
Section 277(7) goes on to provide that the failure by a law practice to comply with this division can be unsatisfactory professional conduct or professional misconduct on the part of any legal practitioner involved. (emphasis added)
It is notable that section 277 does not expressly invalidate proceedings commenced in breach of section 277(2) and that, to the extent that the section does expressly deal with the consequences of failure to comply with the requirements of the division (which includes the requirement to make disclosure under section 269) those consequences are limited to a statement that the failure can be unsatisfactory conduct or professional misconduct.
In Emanuele v Australian Securities Commission (1997) 188 CLR 114 the High Court held by majority (Dawson, Toohey and Kirby JJ; Brennan CJ and Gaudron J dissenting) that the failure by the Commission to obtain the leave of the Court before commencing proceedings, (as then required by the relevant legislation) was a mere defect or irregularity not affecting the validity of the winding-up order. Kirby J said at 147, “a feature of the administration of justice in more recent times has been a general disfavour towards procedural rigidities and a preference for a somewhat more flexible approach to statutory preconditions where these are of a procedural character.” His Honour quoted McHugh JA in Woods v Bate (1986) 7 NSWLR 560 at 567:
In recent times the courts have shown great reluctance to invalidate an act done pursuant to a statutory provision because of the failure to comply with an antecedent condition. Speaking generally, I think that, at the present time, the proper approach is to regard a statutory requirement, expressed in positive language, as directory, unless the purpose of the provision can only be achieved by invalidating the result of any departure from it irrespective of the circumstances or resulting injustice.
The express purposes of Part 3.2 can be met without a conclusion that proceedings commenced in breach of section 277(2) are a nullity. Staying any recovery action until an assessment has taken place recognises the primacy given in the Act to recovery on the basis of the client agreement while ensuring for the client the protections afforded by division 3.2.2. That those outcomes can be achieved by way of a temporary stay is an indicator that the proper construction of section 277 does not result in proceedings commenced in breach of it being invalid.
In the circumstances I order that the proceedings are stayed until a costs assessment under the LPA has taken place.
I did not hear detailed submissions on costs. The outcome of the application involves some limited success for the applicant under circumstances where the respondent concedes that it commenced proceedings contrary to section 277 of the LPA. In the circumstances I make the following orders:
a.the respondent is to pay the applicant’s costs of the application;
b.that costs order does not take effect if either party within 14 days makes a written request to the court that the matter be re-listed for the purpose of seeking some other costs order.
I certify that the preceding forty-seven [47] paragraphs are a true copy of the Reasons for Decision of his Honour Magistrate P J Morrison.
Associate: Matthew Bautz
Date: 23 November 2017
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