Birketu Pty Ltd v Atanaskovic

Case [2025] HCA 2

HIGH COURT OF AUSTRALIA

GAGELER CJ,
GORDON, EDELMAN, STEWARD, GLEESON, JAGOT AND BEECH‑JONES JJ

BIRKETU PTY LTD & ANOR  APPELLANTS

AND

JOHN LJUBOMIR ATANASKOVIC & ORS  RESPONDENTS

Birketu Pty Ltd v Atanaskovic

[2025] HCA 2

Date of Hearing: 17 October 2024

Date of Judgment: 5 February 2025

S52/2024

ORDER

Appeal dismissed with costs.

On appeal from the Supreme Court of New South Wales

Representation

B W Walker SC with A R R Vincent for the appellants (instructed by HWL Ebsworth Lawyers)

S J Free SC with D Birch for the first and second respondents (instructed by Atanaskovic Hartnell)

Submitting appearance for the third respondent

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Birketu Pty Ltd v Atanaskovic

Practice and procedure – Costs – Work performed by employed solicitor – Where first and second respondents are remaining partners of unincorporated law firm which obtained costs order against appellants – Where costs were sought for work undertaken by employed solicitors of unincorporated law firm – Whether order for costs in favour of an unincorporated law firm entitles firm to obtain recompense for legal work performed by employed solicitors of firm.

Words and phrases – "assessment of costs", "Chorley exception", "employed solicitor", "general common law principle", "general rule", "in-house lawyer rule", "in-house solicitor rule", "indemnity", "lawyer-client relationship", "legal services", "order for costs", "partner", "professional detachment", "professional fees", "quantification", "remuneration", "self-represented litigant", "unincorporated law firm".

Civil Procedure Act 2005 (NSW), ss 3, 98.

Legal Profession Uniform Law Application Act 2014 (NSW), Pt 7, Div 3.

Supreme Court Act 1986 (Vic), s 3.

  1. GAGELER CJ, GORDON, EDELMAN, GLEESON AND BEECH-JONES JJ.   A partner in an unincorporated law firm represents the firm in litigation against a former client. The firm is successful in the litigation and procures an order for costs in its favour. The order for costs does not entitle the firm to obtain recompense for legal work performed by the partner: that much is clear from Bell Lawyers Pty Ltd v Pentelow.[1] But does the order for costs entitle the firm to obtain recompense for legal work performed by an employed solicitor of the firm?

  2. Intermediate courts of appeal have divided on that question since Bell Lawyers. For reasons to be explained, the better view is that an order for costs in favour of an unincorporated law firm entitles the firm to obtain recompense for legal work performed by an employed solicitor of the firm.

    This appeal

  3. Atanaskovic Hartnell is an unincorporated legal practice. The first and second respondents, Mr Atanaskovic and Mr Jepps, are its only remaining partners. The appellants, Birketu Pty Ltd and WIN Corporation Pty Ltd (together, "Birketu"), are its former clients.

  4. By proceedings commenced in the Supreme Court of New South Wales in 2018, Atanaskovic Hartnell claimed to recover fees and disbursements for legal services rendered to Birketu. Mr Atanaskovic was the solicitor on the record…

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AGLC
Birketu Pty Ltd v Atanaskovic [2025] HCA 2
Case
[2025] HCA 2
Decision Date

CaseChat Overview and Summary

The High Court of Australia considered an appeal concerning costs awarded to an unincorporated law firm, Atanaskovic Hartnell, against Birketu Pty Ltd. The dispute centred on whether the law firm was entitled to recover costs for legal work performed by its employed solicitors, as opposed to the partners of the firm.

The primary legal issue before the High Court was whether an order for costs in favour of an unincorporated law firm permits that firm to obtain recompense for legal work undertaken by its employed solicitors. This question arose in the context of the court's previous decision in *Bell Lawyers Pty Ltd v Pentelow*, which abolished the "Chorley exception" that allowed lawyers acting as self-represented litigants to recover costs for their own time.

The High Court, by majority, determined that an unincorporated law firm cannot recover costs for the work of its employed solicitors. The Court reasoned that allowing such recovery would, in substance, resurrect the abolished Chorley exception and undermine the principle of equality for litigants established in *Bell Lawyers*. The Court found that the labour and skill of employee solicitors are relevantly the labour and skill of the firm itself, and recovering their salaries would amount to the firm recovering its own time and effort, placing it in a privileged position compared to other self-represented litigants. The Court also considered and overruled the decision of the Victorian Court of Appeal in *United Petroleum*, which had taken a different view on the interpretation of "costs" and "remuneration".

The appeal was dismissed with costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GAGELER CJ, GORDON, EDELMAN, GLEESON AND BEECH-JONES JJ (dissent) STEWARD J (dissent) JAGOT J (dissent)
Although this appeal was argued, and should be decided, by reference to the traditional approach concerning professional legal costs actually incurred by way of expenses, there may be an alternative approach for the recovery of costs involving a different conception of "indemnity" which, in other cases, could have a different effect on quantification. In particular, in Cachia v Hanes[61] the majority described costs as "reimbursement for work done or expenses incurred". The former part of that phrase might be taken to include the reasonable value of non-gratuitous legal work done by another such that, like an award of interest on a judgment sum as an indemnity for being kept out of money even if the judgment sum would not have been used by the recipient to accrue interest,[62] the award of costs as an indemnity for work done would not be concerned with expenses incurred or remuneration paid and, therefore, would not be rebuttable by proof that expenses or remuneration were less than the reasonable value of the work. The costs would be awarded in the same manner as a quantum meruit, upon which "usually the value of services is assessed by reference to charges commonly made by others for like services".[63] In the absence of any argument or any quantification issues in this case, it is unnecessary to consider this point further.[61](1994) 179 CLR 403 at 410 (emphasis added).[62]Jefford v Gee [1970] 2 QB 130 at 146; Haines v Bendall (1991) 172 CLR 60 at 66.[63]See South Australian Harbors Board v South Australian Gas Co (1934) 51 CLR 485 at 501; Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 at 602 [92], 645 [203].Conclusion The decision of the Victorian Court of Appeal in United Petroleum must be overruled. The appeal must be dismissed with costs. In Bell Lawyers Pty Ltd v Pentelow,[64] a majority of this Court abolished an exception to the general rule that a self‑represented litigant may not obtain any recompense for the value of his or her time spent in litigation, known as "the Chorley exception".[65] The exception was in favour of lawyers. Thereafter, subject to another exception in favour of government lawyers and certain in‑house counsel, a solicitor who represented him or herself, in whose favour a costs order was made, could not recover the value of any time he or she spent in litigating a dispute. The issue now for determination is whether a costs order in favour of such a solicitor entitles him or her to recover recompense for the value of an employee's work on that dispute which is, in substance, referable to the salaries and overheads paid by the solicitor in respect of that work. For the reasons which follow, he or she cannot recover such costs. Any other conclusion would make a mockery of what was decided in Bell Lawyers, and would, in substance, resurrect the Chorley exception. [64](2019) 269 CLR 333.[65]The exception was authoritatively established as a rule of practice in London Scottish Benefit Society v Chorley (1884) 13 QBD 872.

Ratio Decidendi

Legal Principle Established

Established by:

Here, it should be concluded that the labour and skill of the employee solicitors who worked on each proceeding was relevantly the labour and skill of the firm Atanaskovic Hartnell.Remuneration Unlike the definition of "costs" in the Supreme Court Act, the definition of "costs" in the Civil Procedure Act expressly refers to "remuneration". A majority of the New South Wales Court of Appeal below thought that this was important, reasoning that the term plainly captured the salary paid to all employee solicitors, whether by a firm, a government department or a corporation.[83] With great respect, I disagree. As both the primary judge and Ward P recognised below, the reasoning of the Victorian Court of Appeal in United Petroleum assumed that the costs referable to employee solicitors were capable of being "costs" within the meaning of s 3(1) of the Supreme Court Act.[84] The better view is that the word "remuneration" aptly captures the understanding concerning employee solicitors of government departments and corporations, and no more.[83]Atanaskovic v Birketu Pty Ltd (2023) 113 NSWLR 305 at 347 [186]-[188] per Kirk JA, 376-377 [338], 377 [342] per Simpson A-JA.[84]Atanaskovic v Birketu Pty Ltd (2023) 113 NSWLR 305 at 341 [155] per Ward P; Birketu v Castagnet [2022] NSWSC 1435 at [48] per Brereton JA.Anomalous outcome The substantive effect of the Court of Appeal's decision below is to restore the Chorley exception for firms of solicitors. They can avoid its abolition and still be the solicitors on the record, simply by using their own employees to do the required work. They can thereby recover some or all of the salary paid to a given employee, which they otherwise would have been liable to pay anyway. That is an anomalous outcome. The Victorian Court of Appeal was of the same view in United Petroleum. Their Honours concluded:[85]"Ultimately, we have come to the conclusion that to treat employee solicitors of a legal firm as falling within the 'well-established understanding' would considerably undermine Bell Lawyers. It would extend the 'well-established understanding' to cases of self-represented legal firms and perpetuate a significant degree of special treatment not accorded to non-lawyer litigants, referred to in Chorley as 'ordinary litigants'.In substance it would, anomalously, allow firms of solicitors to recover for their own time spent in the litigation. It would also mean that a legal practice with employees could recover fees when a sole practitioner could not."[85][2020] VSCA 15 at [119]-[120]. In the New South Wales Court of Appeal below, Ward P, whose reasons I also respectfully agree with, was of the same view. Her Honour said:[86]"To enable an unincorporated law firm to recoup the cost of employed solicitors amounts to recovery of the partnership's own time and effort (albeit through the partnership's employed solicitors) as professional legal costs, in effect reverting to a position where solicitor litigants are in a privileged position compared to other self-represented litigants (inconsistently with the policy of equality extolled in Bell Lawyers)."[86]Atanaskovic v Birketu Pty Ltd (2023) 113 NSWLR 305 at 343 [161].