Bennett (a pseudonym) v Farrar Gesini Dunn Pty Ltd
[2019] VSC 744
•12 December 2019
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COSTS COURT
S ECI 2019 01314
IN THE MATTER of Section 198(1) of the Legal Profession Uniform Law Application Act 2014
BETWEEN
| JENNIFER BENNETT (a pseudonym) | Applicant |
| v | |
| FARRAR GESINI DUNN PTY LTD (TRADING AS FARRAR GESINI DUNN) | Respondent |
JUDGE: | Wood AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 November 2019 |
DATE OF DECISION & REASONS: | 12 December 2019 |
CASE MAY BE CITED AS: | Bennett (a pseudonym) v Farrar Gesini Dunn Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 744 |
DECISION & REASONS
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COSTS COURT - Legal Profession Uniform Law 2014 – Sections 172, 174(1) and 178(1)(a) - Costs agreements void for non-compliance with disclosure – Johnston v Dimos (2019) VSC 462, referred to – Family Law hourly rates - Basis of assessment
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr B Wyatt | Sladen Legal |
| For the Respondent | Mr P Lovell | Farrar Gesini Dunn |
NOTE: The publication of these reasons employs a pseudonym for the name of the applicant as the respondent acted for the applicant in Family Court proceedings. Cognizant of the provisions and intention of Section 121 of the Family Law Act (Cth) this was ordered on 5 December 2019 because otherwise this decision would identify or could lead to the identification of a party to a proceeding in the Family Court of Australia.
HIS HONOUR:
I heard this matter on 28 November 2018 and reserved my decision. I now publish my decision and reasons. This proceeding was initiated pursuant to the Legal Profession Uniform Law 2014 (‘Uniform Law’) on 28 March 2019. The respondent acted for the applicant in Family Law and Intervention Order proceedings. The main proceeding was in relation to Family Law issues around parenting and property. Documents filed in the proceedings[1] established that total legal costs incurred to 18 December 2018 were in excess of $450,000. The applicant stated at the hearing that additional invoices took the costs to in excess of $490,000 by February 2019.[2]
[1]Letter to the applicant dated 18 December 2018 and reproduced at page 105 of 107 pages filed 14 May 2019 as part of ‘Material Respondent Intends to Rely Upon’.
[2]Transcript – 28 November 2019 – page 4 – lines 11 to 23.
Orders were made on 30 April 2019 for the respondent to file and serve any Costs Agreements and Disclosure material relied upon. The applicant was then to file and serve a Notice of Dispute with the respondent to file and serve any Response. The order also provided for a mediation on 19 June 2019 but that process was unsuccessful.
Pursuant to that order of the Judicial Registrar made on 30 April 2019 the respondent filed a document headed ‘Material Respondent Intends To Rely Upon’ on 14 May 2019. This material comprises 107 pages and included two signed Costs Agreements. The first is dated 14 September 2017 (‘First Costs Agreement’), and the second is dated 11 July 2018 (‘Deferred Costs Agreement’). The document also listed 30 letters and emails dated between 14 September 2017 and 8 February 2019 without describing their content.
The applicant’s Notice of Dispute, filed 27 May 2019, identified a lack of information about costs charged and paid[3] and took issue with the lack of estimates both from counsel,[4] and in relation to ‘work to be done’ by the respondent apart from two letters dated 14 September 2017 (prospects of appeal) and 21 September 2017 (parenting issues).[5] The Notice of Dispute contended for assessment of the respondent’s costs on the basis of the Family Court scale.[6] The last matter was presumably put on the basis that the non-compliance with disclosure obligations contained in the Uniform Law rendered any Costs Agreement void.[7]
[3]Paragraphs 1 and 2 of the Applicant’s Notice of Dispute.
[4]Paragraph 5 of the Applicant’s Notice of Dispute.
[5]Paragraph 3 of the Applicant’s Notice of Dispute.
[6]Paragraph 4 of the Applicant’s Notice of Dispute.
[7]Section 178(1)(a) of the Uniform Law.
The respondent’s Response, filed 12 June 2019, outlines all the occasions that correspondence or bills were sent in relation to costs paid.[8] There were nine occasions where updated estimates were said to have been provided. These appeared in sub-paragraphs 3(a) to (i) in the document and are referred to and analysed at paragraphs 30 to 38 below. Estimates for counsel fees were said to have been made from time to time.[9] In the event that there was no valid costs agreement, the respondent contended for the costs to be assessed on the hourly rates in the Costs Agreements having regard to the criteria in section 172(2) of the Uniform Law, and in particular the complexity and difficulty of the retainer.[10] Relying on the Civil Procedure Act 2010 it was put that costs should be assessed on the agreed rates and any adjustment be made at the conclusion of the assessment.[11]
[8]Paragraphs 1 and 2 of the respondent’s Response.
[9]Paragraph 4 of the respondent’s Response.
[10]Paragraph 5 of the respondent’s Response.
[11]Paragraph 6 of the respondent’s Response.
From the bills themselves it can be gleaned that there was one child involved, two properties and four corporate and/or trust entities. The assets involved were significant. In a letter dated 31 January 2018 to the applicant the respondent confirmed that the initial instructions from the applicant were that there could be $20m to $50m worth of assets in play.[12]
[12]Reproduced at page 50 of the 107 pages filed as part of ‘Material Respondent Intends To Rely Upon’.
Arising from the call-over on 18 June 2019 an order was made which identified four issues in ‘OTHER MATTERS’[13] to be determined at the hearing. First, the validity of either or both of the Costs Agreements. Secondly, if they are void on what basis should the respondent’s costs and counsel’s fees be assessed. Thirdly, whether the bills in existence were sufficiently itemised. Fourthly, the issue of liability for counsel fees. The order also provided for affidavits, experts, notices for cross examination and written submissions.
[13]Paragraphs (a) to (d) appearing in ‘OTHER MATTERS’.
The matter was listed for hearing on 28 November 2019 for determination of the preliminary issues identified. The respondent filed an affidavit of Joseph Christopher Buckley affirmed 9 August 2019 and an Expert Report from Antonella Cambria Terranova dated 8 August 2019.
The affidavit of Mr Buckley deposes to the history of the firm, the experience of Tom Mainwaring and himself, their hourly rates, the briefing of counsel, and the complexity and urgency of the retainer. The Expert Report contains opinion evidence in relation to the range of hourly rates for practitioners who specialise in Family Law matters and the complexity of this particular retainer. These documents are principally relevant to the second issue identified in ‘Other Matters’ in the order of 18 June 2019 referred to in paragraph 7 above.
The applicant elected not to file any affidavit or independent expert report in reply by 7 September 2019. There was therefore no necessity for the respondent to file material in reply by 16 September 2019. The applicant elected not to require the attendance of the author of the Expert Report for the purpose of cross examination, but requested the attendance of Mr Buckley in a Notice dated 23 September 2019. That request was withdrawn prior to the hearing.
As ordered, the parties filed and exchanged written submissions by 15 November 2019.
The Supreme Court Act 1986 provides that the Costs Court ‘must exercise its jurisdiction with as little formality and technicality, and with as much expedition, as the requirements of this Act, the Rules and the proper consideration of the matters before the Court permit’.[14] A large amount of material was filed pursuant to the order made by the Judicial Registrar on 30 April 2019. I have had regard to this material notwithstanding it was not incorporated into sworn evidence as both parties made reference to it in written and oral submissions.
[14]Section 17D(3) of the Supreme Court Act 1986.
The main focus of the applicant’s written submissions was on the first and second preliminary questions, namely the validity of the Costs Agreements given the non-compliance with disclosure obligations, and on the basis should costs be assessed.
The applicant asserted that the Expert Report does not touch upon the first,[15] third[16] or fourth questions. In relation to the fourth question the fee slips from counsel were sent to the Expert but no conclusion was expressed by her. The affidavit of Mr Buckley was also said to not address the fourth question other than to state what counsel charged,[17] or the third question.[18] The issue of compliance with disclosure obligations which underpins the first question was said by the applicant to have not been adequately addressed in that affidavit.[19]
[15]Paragraph 8 of the applicant’s written submissions.
[16]Ibid.
[17]Paragraph 19 of the applicant’s written submissions.
[18]Paragraph 12 of the applicant’s written submissions.
[19]Paragraphs 16 and 17 of the applicant’s written submissions.
In summary, the applicant contended in relation to the first issue that both the Costs Agreements are void due to failures to comply with disclosure obligations.[20] In relation to the third issue it was contended that the bills were not sufficiently itemised ‘to assess what the costs event or transaction related to, i.e., ”letter to client” or “receipt of email” or “telephone call with client.”’ In relation to the fourth issue it was stated that the only finding that can be made is that the respondent is liable as the invoices of counsel are ‘rendered/addressed’ to the respondent and marked to the attention of Mr Buckley.[21]
[20]Paragraphs 13 to 18 of the applicant’s written submissions.
[21]Paragraphs 11 and 12 of the applicant’s written submissions.
The major focus in the applicant’s written submissions was the second issue. It was contended in the written submissions that the respondent’s costs should be allowed at less than the rates in the Costs Agreements[22] and that counsel fees be assessed on the basis of a court scale, with the Family Court, County Court, Supreme Court or Federal Court scales being options.[23] The applicant conceded that the thrust of the respondent’s affidavit material was to establish that the retainer was ‘complex’, but sought to distinguish the present case from the decision in Johnston v Dimos[24] where a Family Law Costs Agreement was void but the hourly rates contained therein were held to be the basis of taxation in any event.[25] This will be referred to below.
[22]Paragraph 25 of the applicant’s written submissions.
[23]Paragraph 19 of the applicant’s written submissions.
[24](2019) VSC 462.
[25]Paragraphs 23 to 25 and Attachment ‘A’ of the applicant’s written submissions.
The respondent’s written submissions made concessions in relation to the third and fourth issues. In relation to the third issue, that being itemisation, the respondent conceded that the bills were not fully itemised and agreed to provide further and better copies of the same bills which number the items, include the name or initials of the operatives and more detail for emails including dates and times.[26] In relation to the fourth issue, that being liability for counsel fees, the respondent conceded that they were primarily responsible for payment and that the fees could be assessed in the ordinary manner.[27]
[26]Paragraphs 22 and 23 of the respondent’s written submissions.
[27]Paragraph 24 of the respondent’s written submissions.
In relation to the first issue the respondent asserted that the two Costs Agreements are not void and that disclosure obligations were complied with. Some 32 documents were relied upon.[28] Some of these were already mentioned in the Response but additional documents were now relied upon. These additional documents are referred to in paragraph 40 below.
[28]Paragraph 5(a) to (v) of the respondent’s written submissions.
In relation to the second issue, in the event that the Costs Agreements are void, the respondent contended for the assessment to take place on the hourly rates in the Costs Agreements and counsel fees as rendered. To this end the respondent relied on Johnston v Dimos and the content of the uncontested Expert Report.
The First Costs Agreement contained a schedule of hourly charge out rates exclusive of GST.[29] The two significant ones were Joe Buckley at $530 exclusive of GST and Tom Mainwaring at $420 exclusive of GST. The rates disclosed in the Deferred Costs Agreement (signed 11 July 2018) were linked to positions held, not named individuals. The rates appear to be $530 exclusive of GST for an Associate Director (presumably Mr Buckley) and $420 exclusive of GST for a solicitor (presumably Mr Mainwaring).
[29]Paragraph 32 of the First Costs Agreement and Attachment 1.
In his affidavit Mr Buckley deposes that his hourly rate was $530 plus GST from 1 July 2017 to 30 June 2018 at which time it then increased to $550 until the applicant entered the Deferred Costs Agreement on 11 July 2018. He deposes that his rate then increased to $594 and remained at that rate even though when he became a Director his rate increased to $650 from 1 January 2019.[30] However, the First Costs Agreement has his rate at $530 exclusive of GST and in the Deferred Costs Agreement presumably his rate was still $530 exclusive of GST if he was not a Director at that time. I also note that the invoices issued at the start of 2019 state that his rate will increase from 1 March 2019 (not 1 January 2019) and to $630 (not $650).
[30]Paragraph 4 of his affidavit affirmed 9 August 2019.
Mr Buckley also deposes to the fact that Mr Mainwaring was admitted in May 2017 and his hourly rate was $420 plus GST from 1 July 2017 to 30 June 2018 and then $454 from 11 July 2018 under the Deferred Costs Agreement.[31] However, the First Costs Agreement has his rate at $420 plus GST and that same rate appears to be his rate in the Deferred Costs Agreement.
[31]Ibid at paragraph 6.
The invoices filed that cover the relevant period seem to confirm that Mr Buckley started at $530 per hour exclusive of GST and the rate did increase to $594 after 11 July 2018. Mr Mainwaring also started at $420 per hour exclusive of GST and increased to $454 after 11 July 2018. On the material filed, the rates charged after 11 July 2018 appear to be, prima facie, inconsistent with the Deferred Costs Agreement.
From the tax invoice filed counsel fees for Dr Timothy McEvoy QC are charged at $660 per hour inclusive of GST. In his affidavit Mr Buckley deposes that the rate was $660 exclusive of GST.[32] This is incorrect. He also deposes that Rachel Matson’s hourly rate is $220 plus GST.
[32]Paragraph 7 of the affidavit affirmed 9 August 2019.
It is worth noting here that the hourly rate for Ms Matson is considerably less than Mr Mainwaring, even though she has been admitted for longer. Section 173 of the Uniform Law mandates that ‘a law practice must not act in a way that necessarily results in increased legal costs payable by the client’. This may be a live issue for the taxation but given the discrepancy in hourly rates between junior solicitor and junior counsel employed, it might have been preferable to utilise, and delegate more work to, Ms Matson, and less to Mr Mainwaring. I express no concluded view about this as it will be a matter for the taxation.
The First Costs Agreement (September 2017) had a Costs Disclosure Notice attached but no estimate of total legal costs was included as required by s 174(1)(a) of the Uniform Law. The estimate of total legal costs must also include disbursements.[33]
[33]See the definition of ‘legal costs’ in section 6 of the Uniform Law.
The Deferred Costs Agreement (July 2018) included generic boilerplate estimates for matters involving a range of matters, namely Family Law, Estate Planning, Probate and Estate Litigation. The Family Law part was not tailored to the applicant’s situation that existed at that time, as the document was created in November 2017.[34] The document had estimates to various stages up to a Binding Financial Agreement. Where assets were to exceed $3,000,000 the estimate was submitted by the respondent to be around $152,000. In the event of litigation the estimate to the end of the conciliation/private mediation/family report stage with more than one interim hearing was a potential maximum of $55,000. To the end of a final hearing in a complex matter there was a further potential maximum of $198,000 and $16,500 for interim hearings. The respondent’s written submissions put the total estimated figure that was conveyed in these documents at $411,400.[35]
[34]The date appearing at the foot of the document.
[35]Paragraph 5(b) of the respondent’s written submissions.
As outlined in paragraph 34 below, this was a slight reduction to the total estimate given in January 2018. The applicant submitted at the hearing that these estimates were generic and some of the component parts had no application to the applicant’s particular situation.[36] The Court was told at the hearing that the applicant had already been billed around $385,00 as at July 2018.[37]
[36]Transcript – 28 November 2019 – page 14 - lines 25 to 27.
[37]Transcript – 28 November 2019 – page 17 – lines 4 to 20.
The Uniform Law requires an initial written estimate of total costs and written updates where there has been a significant change to the initial estimate and any updated estimates.[38] To that end, the respondent initially relied on the nine letters and emails referred to in paragraph 5 above. The foreshadowed analysis of them follows.
[38]Sub-sections 174(1)(a),(b) and 174(6) of the Uniform Law.
The letter of 14 September 2017 makes reference to a requirement for an estimate but discloses none apart from $5,000 to give advice in relation to the prospects of an appeal from an order of Justice Cronin – paragraph 3(a) of the Response.
The letter of 21 September 2017 gives an estimate of $5,000 for preparing an application and affidavit to vary final parenting orders – paragraph 3(b) of the Response.
The email of 2 December 2017 refers to an urgent application in relation to the scheduled auction on 7 December 2017 of the Elwood property and a request is made for a payment of $70,000 – paragraph 3(c) of the Response.
The letter of 13 December 2017 is also in relation to that property issue and it updates the estimate of $35,112 given on 27 November 2017 to $58,420 – paragraph 3(d) of the Response. Costs were already $108,112 to 6 December 2018.
The letter of 31 January 2018 confirms that costs and disbursements billed to that point were $255,773.44 and that total costs to the end of a final hearing could be a further $170,000 – paragraph 3(e) of the Response. That is, a total estimate of $425,773. This appears to be the first attempt to provide a forward estimate of total costs and comes some four months after the commencement of the retainer.
The email of 16 March 2018 merely requests a payment of $20,000 to cover work up to a hearing on 22 March 2018 – paragraph 3(f) of the Response.
The email of 5 April 2018 confirms costs to that date of $314,804.94 and requests arrears of $18,090.80 for the respondent, and $26,180 for work already performed by counsel. Only a requested further sum of $10,000 represents an allowance for future costs – paragraph 3(g) of the Response.
The Deferred Costs Agreement and estimate dated 11 July 2018 referred to in paragraph 27 above comprises the documents relied upon in paragraph 3(h) of the Response. Costs to April 2018 were $314,804.94 (paragraph 36 above) and $385,000 to July 2018 (paragraph 28 above). On the assumption that the estimate of $411,400 was a compliant one, this was only $26,000 more than what had actually been incurred in costs to that date. Given the stage of the proceedings that had been reached at that time it was probably an inaccurate one.
A letter of 18 December 2018 includes a forward estimate of $28,000 but this is only for drafting further written submissions – paragraph 3(i) of the Response.
Therefore, in summary, and on the basis of these documents initially relied upon, there was no total future costs estimate in writing at the start of the retainer in September 2017 to satisfy section 174 (1)(a) of the Uniform Law and no attempt at compliance with the Uniform Law until 31 January 2018 when the estimate of $425,773 for total costs was provided. The actual costs at that time were still within that figure so no updating was required for some little time thereafter. However, on 11 July 2018 the Deferred Agreement and Disclosure material revised that figure downwards. There was then no compliant estimate until the 18 December 2018 letter when costs had reached $457,664.13 in billed work with a further $18,000 for unbilled work in progress. An estimate of a further $28,000 was then given, making a total of $503,664.13.
The additional supplementary documents added in the respondent’s written submission[39] do not take the matter further. For example, they merely deal with updating the applicant with billed and unbilled completed work, requests to be put in funds for identifiable imminent stages, amounts held in trust, and negotiations and amendment to the Deferred Costs Agreement. They are not forward estimates of total legal costs.
[39]Sub-paragraphs 5 (h),(i),(k),(n),(o),(p),(q),(u),(t), & (v) of the respondent’s written submissions.
In the event that one or both of the Costs Agreements are void, the applicant contends in the Notice of Dispute for the respondent’s costs to be assessed on Family Law scale[40] and in the written submissions for counsel fees to be assessed against one of the four court scales[41] referred to in paragraph 16 above . A similar argument was considered in Johnston v Dimos[42] (‘Johnston’).
[40]Paragraph 4 of the Notice of Dispute.
[41]Paragraph 19 of the applicant’s written submissions.
[42](2019) VSC 462.
The applicant relies on section 178(1)(a) of the Uniform Law to contend that the First Agreement is void for non-compliance with disclosure obligations in relation to estimates and updating of estimates as provided for in the Uniform Law. On the available evidence there was non-compliance with section 174(1)(a) from September 2017 until January 2018 when the total estimate of $425,773 was provided. There was then compliance with the Uniform Law until at least July 2018 when the Deferred Costs Agreement came into force. Thereafter there was non-compliance with section 174(1)b) as the estimate for the future costs was not updated before the costs reached $475,664 in December 2018. The forward estimate of a further $28,000 was given then and this was accurate as that took the estimate to $503,664.13 and the costs to February 2019 were $490,000.
The respondent contends that estimates were provided in accordance with the Uniform Law. That argument cannot be sustained.
The Uniform Law requires an initial estimate (that is, of total future costs) as soon as practicable after instructions are initially given[43] and an update of significant change to that initial estimate or any updated estimate.[44]
[43]Section 174(1)(a) of the Uniform Law.
[44]Section 174(1)(b) of the Uniform Law.
The Uniform Law requires the initial estimate and updated estimates to be given in writing.[45] There is no doubt the applicant was given updated information about costs from time to time in the form of invoices and requests for money. The UniformLaw requires updated estimates of total legal costs in writing as soon as practicable after there is significant change to information previously disclosed, that is, estimates of total future costs.
[45]Section 174(6) of the Uniform Law.
As stated in Johnston, ‘There is a prevalent misconception in the profession about the estimate provisions in the Act. Demands for progress payments or the delivery of regular invoices for work already completed do not satisfy the Act. Section 174(1) requires an initial estimate of total future legal costs and a regular updating of this figure when this has significantly changed and is out of date. Section 174(6) mandates these to be in writing.’[46]
[46](2019) VSC 462 at [19].
The applicant sought to distinguish Johnston on the basis that there was evidence of oral estimates in that case which if put in writing as required by the Uniform Law would have been compliant.[47] In that case the hourly rates in the relevant Costs Agreement were still applied as the basis of assessment in the bill. Here there was said to be no such evidence and in that regard Johnston was said to be ‘as good as it gets’ and here the respondent’s failures were ‘as bad as it gets’[48] in relation to disclosure. The applicant made oral submissions at the hearing that the hourly rate should be ‘capped’ at some lower figure than those in the Costs Agreements because of the non-compliant disclosure. However, section 172(2) includes a number of matters that need to be considered in addition to failures identified in section 172(3) and they will only emerge on taxation. Capping hourly rates at this point at some arbitrary figure is not appropriate.
[47]Transcript – 28 November 2019 – page 21 - line 30 to page 22 – line 2.
[48]Transcript – 28 November 2019 – page 23 – lines 18 to 20.
The failures to comply with the Uniform Law as summarised in paragraph 39 above renders both the First Costs Agreement and the Deferred Costs Agreement void.
The appropriate remuneration level for work performed will usually be determined at the taxation having regard to the criteria and level of scrutiny of the actual work required by the Uniform Law.[49] The issue here is really on what basis should any itemised bill be drawn and subsequently assessed against at taxation. What is ultimately allowed is a matter for the taxation. Irrespective of whether there is, or is not, a valid Costs Agreement the Court still has an obligation to determine what is fair, reasonable and proportionate.[50]
[49]Section 172 of the Uniform Law.
[50]Section 172(1) of the Uniform Law.
Having regard to the Expert Report of Ms Terranova and the range of hourly rates for a Director,[51] the rates for Mr Buckley in both Costs Agreements appear to be reasonable given his experience, specialisation and the complexity of the retainer. The rate for Mr Mainwaring of $420 plus GST in both Costs Agreements is above the upper end of the range for a junior solicitor as disclosed in the Expert Report at $425 inclusive of GST,[52] but given the complexity of the retainer, his work can be claimed in the itemised bill at the rate in both Costs Agreements even though he was only admitted in May 2017. Whether this is justified may depend in part on the quality and complexity of tasks he performed and the consideration of the actual division of work, or division of work that should have occurred, between him and Ms Matson as flagged in paragraph 25 above. It is clear from the bills that the applicant was heavily involved in the matter as there was considerable communication with the respondent and the subject matter of the retainer was complex, emotionally charged with much at stake.
[51]Paragraph 16 of the Expert Report - $600 to $750 inclusive of GST.
[52]Paragraph 16 of the Expert Report.
In relation to the scale rate in the Family Law scenario a solicitor’s rate for an attendance was $237.70 per hour but work involving documents was allowed on a folio basis. However, there is also a discretion when applying the scale to add a loading for a range of factors including responsibility, urgency, quality, number of documents, complexity, etc.[53]
[53]Family Law Rules 2004 at Rule 19.35.
In relation to counsel fees the various court scale rates that the applicant contends for are not necessarily lower than those charged. Senior counsel charged $660 per hour inclusive of GST and junior counsel charged at $220 exclusive of GST. Under the Family Court scale the maximum for senior counsel was $829.21 inclusive of GST and $411.85 for junior counsel. The maximum in the Supreme Court was $854 for senior counsel and $569 exclusive of GST for junior counsel. The County Court was 80% of these figures. The Federal Court published a ‘National Guide to Counsel Fees’ of up to $740 for senior counsel and $530 for junior counsel.
This takes us to the third issue, namely whether the bills are sufficiently itemised.
The Uniform Law requires disclosure of information about a client’s right ‘to receive a bill from the law practice and to request an itemised bill after receiving a bill that is not itemised or is only partially itemised.’[54] That disclosure occurred.[55] The Uniform Rules state that a law practice is entitled to recover an amount in an itemised bill that is higher than the amount in the lump sum bill but only if the law practice gave an appropriately worded disclosure ‘to the client indicating that the total amount of the legal costs specified in any itemised bill may be higher than the amount specified in the lump sum bill’.[56]
[54]Section 174(2)((a)(iii) of the Uniform Law.
[55]Paragraph 7 in the First Costs Agreement and paragraph 19 in the Deferred Costs Agreement.
[56]Rule 74(1)(a) of the Uniform Rules.
The respondent’s bills did not include such wording. It would be open for speculation that this was on the basis that they regarded their bills as sufficiently itemised.
The inclusion of such words on a bill is not definitive of whether the bill is a lump sum one in any event. Wording to similar effect was included in the bills considered by the Court of Appeal in Piper Alderman v Smoel & Anor[57] (‘Piper Alderman’). The law practice in that case reserved the right to provide a detailed bill and ‘if the detailed bill is for a greater amount than this bill you are liable for the greater amount.’[58] The Court of Appeal concluded that the bills were sufficiently itemised to not constitute a lump sum bill. The phrases ‘lump sum bill’ and ‘itemised bill’ are now defined in the Uniform Rules.[59] When Piper Alderman was determined the applicable regime was contained in the LegalProfession Act 2004 and the definitions appeared in that Act.[60] The definitions themselves however remain unchanged under the Uniform Law scheme. Similarly, the Legal Profession Act 2004 contained the provision that enabled an itemised bill to claim, and on assessment be allowed, a sum that exceeds the sum in a lump sum bill.[61] The equivalent provision now appears in the Uniform Rules.[62]
[57](2017)VSCA 42.
[58]Ibid at ]10].
[59]Rule 5 of the Uniform Rules.
[60]Section 3.4.2 of the Legal Profession Act 2004.
[61]Section 3.4.43(2) of the Legal Profession Act 2004.
[62]Rule 74.
However, the respondent has agreed to produce a more detailed bill to assist the taxation process. What they cannot do is claim more than the sum originally claimed for the reasons outlined in paragraphs 54 and 55 above. They also cannot claim more than they are entitled to under the Costs Agreements (paragraphs 20 to 23 above).
In relation to the fourth issue as to who is liable for counsel fees both the First Costs Agreement and the Deferred Costs Agreement state that the respondent is the agent for the applicant when it comes to counsel fees and the applicant is liable for fees billed to the practice.[63] Those Costs Agreements are void but again possibly not much turns upon this as the respondent has conceded they are liable.[64] In the absence of backsheets, Costs Agreements and documentation emanating from counsel it is a reasonable assumption that the contractual arrangements are the usual course of dealing in the sector in this situation. That is, counsel looks to the respondent for payment and the respondent looks to the applicant to be indemnified. The respondent confirmed that this was the situation at the hearing.[65]
[63]Paragraphs 26 & 27 in the First Costs Agreement and paragraphs 11 & 12 in the Deferred Costs Agreement.
[64]Paragraph 24 of the respondent’s written submissions.
[65]Transcript – 28 November 2019 – page 34 – lines 24 to 28.
The previously operative legislation (section 3.4.19(b) of the Legal Profession Act 2004) made it clear that the Family Law scale would apply by default in the absence of a Costs Agreement. This was the automatic consequence of non-compliance with disclosure. There is now a clear parliamentary intention not to make the Family Law scale the automatic default mode of assessment where a costs agreement is void.
Under the Uniform Law the Court must consider whether or not a valid Costs Agreement exists.[66] It is the non-compliance with disclosure which the applicant relies upon to persuade the Court not to tax on the same terms as the void agreements. The reasonableness of its terms are relied upon by the respondent as an argument to tax on its terms notwithstanding the fact it is void. This is supported by the contents of the Expert Report, the author of which was not cross examined.
[66]Section 199(2)(a) of the Uniform Law.
There are a number of factors outlined in section 172 of the Uniform Law to be considered when determining fair and reasonable charging. Some of these involve considerations that might only become clear in the assessment proper. For example, urgency, time and place where the work was performed, the number and importance of documents and the quality of the work.[67] Logically a final determination cannot be made until the conclusion of the assessment. These matters will emerge in the taxation when the work itself is examined, and the quantum for individual items and overall costs, are assessed against them. All that is being determined at this point is the basis upon which the bills are drawn and assessed against.
[67]Section 172(2)(d)(i),(iii),(iv),(v) and (e) of the Uniform Law.
Although both the First Costs Agreement and the Deferred Costs Agreement are void, as a general principle the respondent’s costs are to be assessed on the basis of the hourly rates specified in them and counsel fees are to be assessed on the basis that they were rendered.
This finding should not be seen as ‘rewarding’ the respondent in spite of breaching the Uniform Law, just as applying a lower rate should not be done as a mode of ‘punishment’ for non-compliant disclosure. The Uniform Law is a scheme which already sets out a myriad of consequences for breaches of the Uniform Law. In addition to the Costs Agreement being void (s 178(1)), there is a loss of the prima facie presumption that the costs in the Costs Agreement are fair and reasonable (s 172(4)(a)), the breach can amount to unsatisfactory professional conduct (s 178(1)(d)), the law practice is prima facie liable for costs of the proceedings (s 204(2)(a)), and the non-compliance can be one of the factors considered in the assessment (s 172(3)).
Irrespective of whether there is no Costs Agreement, or there is a valid Costs Agreement, or there is a void one, the obligation on the Costs Court remains the same, namely to assess what is fair and reasonable (ss 172(1) and 200(1)).
The parties should now have an opportunity to consider these reasons and attempt to frame a consent order which incorporates the result of this preliminary hearing and the timetabling necessary to advance what remains to be addressed.
Matters to be considered include the inspection of the file, provision of objections, the approach to be taken in relation to the costs of the preliminary hearing, suitability of the matter for further mediation and suitable dates, or estimates for the hearing of the assessment and suitable dates.
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