Carkeek v Aubrey F Crawley & Co

[2024] NSWSC 86

Supreme Court

New South Wales

Medium Neutral Citation:

Carkeek v Aubrey F Crawley & Co [2024] NSWSC 86

Hearing dates:

7 February 2024

Date of orders:

14 February 2024

Decision date:

14 February 2024

Jurisdiction:

Common Law

Before:

Fagan J

Decision:

1. Extend time for filing of the summons by the first plaintiff up to and including 31 January 2023.

2. Extend time for the commencement of the second plaintiff’s appeal, by her joinder to the proceedings as a plaintiff, up to and including 29 June 2023.

3. Dismiss the appeal by the first plaintiff.

4. Order that the first plaintiff pay the defendant’s costs of the proceedings.

5. Uphold the appeal by the second plaintiff.

6. Order that the certificate of determination of review issued by the second and third defendants on 23 September 2022 and sent to the parties to the review by the Manager, Costs Assessment on 4 October 2022 be set aside insofar as it is issued against Sophie Pamela Carkeek, named in the said certificate as Interested Party.

7-9 Directions for an application for gross sum costs determination in respect of the costs in order 4.

Catchwords:

COSTS – costs assessment Uniform Law costs – determination of review panel – appeal to Supreme Court – where delay in instituting appeal – where second plaintiff later joined to proceedings – whether second plaintiff entered into client-solicitor relationship or was contractually bound as a third party payer and liable to pay costs – question of jurisdictional fact for review panel

Legislation Cited:

Bankruptcy Act 1966 (Cth)

Legal Profession Uniform Law 2014 (NSW)

Legal Profession Uniform Law Application Act 2014 (NSW)

Cases Cited:

Amirbeaggi v EB [2023] NSWCA 108

Bingham v Bevan [2023] NSWCA 86

Category:

Principal judgment

Parties:

Stephen Robert Carkeek (first plaintiff)
Sophie Pamela Carkeek (second plaintiff)
Christopher William Crawley t/as Aubrey F Crawley & Co (first defendant)
Stephen Lancken (second defendant)
Christopher Plummer (third defendant)

Representation:

Counsel:
Self-represented (first plaintiff)
PR Glissan (second plaintiff)
A Ogborne (first defendant)

Solicitors:
Self-represented (first and second plaintiffs)
Aubrey F Crawley & Co (first defendant)
Crown Solicitor’s Office (second and third defendants)

File Number(s):

2023/32715

Publication restriction:

No

JUDGMENT

1. By an amended summons filed on 2 October 2023 the plaintiffs appeal from an assessment of costs by a review panel. The appeal is brought pursuant to s 89(1)(b) of the Legal Profession Uniform Law Application Act 2014 (NSW) (“the Application Act”). The appeal is brought as of right because the grounds raise a dispute as to the entire amount of the assessment, which was more than $100,000, so that the threshold in s 89(1)(b) is exceeded. Rule 50.3 of the Uniform Civil Procedure Rules (“UCPR”) prescribes that a summons commencing such an appeal is to be filed within 28 days from the “material date”. In this case, that was 4 October 2022 when the review panel’s certificate of assessment was sent by the Manager, Costs Assessment to the plaintiffs. The first plaintiff filed the original summons, in his name only, on 31 January 2023. On 29 June 2023 an order was made with the consent of the first plaintiff that the second plaintiff be joined as a plaintiff. Joinder was effected by the filing of the amended summons on 2 October 2023. By force of r 6.28 the date of commencement of the proceedings so far as they concern the second plaintiff is taken to be 29 June 2023. The parties submitted that the second plaintiff would be deemed to have commenced her appeal on the date on which the first plaintiff filed his original summons, relying upon r 19.2, however that rule is in applicable. In the circumstances, both plaintiffs require an extension of time pursuant to r 50.3(2).

2. The first defendant is a solicitor who carried out extensive legal work on instructions from the first plaintiff between 4 April 2016 and 4 June 2019. The second and third defendants are the members of the review panel. On their behalf submitting appearances have been filed. I will refer to the first defendant hereafter as “the defendant”. The grounds of review have not been drawn by a trained lawyer and can most readily be understood in paraphrase, as follows (omitting ground 1, which does not raise any substantial point):

(2) The plaintiffs are not liable to the defendant for any costs because the defendant agreed to accept in lieu of fees, a share in a business that was being commenced by the first plaintiff.

(3) The legal work that is the subject of the defendant’s claim for costs was performed solely for a company, Melded Fabrics Australia Pty Ltd (“Melded Fabrics”), in defence of proceedings brought against it. The plaintiffs were not parties to those proceedings, “there were no personal guarantees for the payment of costs” and the plaintiffs are not personally liable to the defendant “as directors or otherwise”.

(4) A costs agreement signed by the plaintiffs and the defendant is void.

(5) The panel erred in a GST calculation, resulting in an over assessment of the costs by $2,734.

(6) The panel’s global reduction of time-charged costs by 2%, on the basis that not all the defendant’s attendances billed in six minute increments actually occupied six minutes, lacked any reasonable foundation and was arrived at without affording the plaintiffs an opportunity to be heard and was an error of law.

(7) The rate of $660 per hour, including GST, that was allowed for the defendant’s professional costs was unjustified for items of work that should have been performed at a lower rate by less skilled staff.

The first plaintiff relies upon all grounds. The second plaintiff relies upon only grounds (3) and (4).

3. Determination of the threshold question of whether time for commencement of the appeal should be enlarged requires the Court to consider the length of the delay, the reasons for the delay, whether the plaintiffs have reasonably arguable grounds of appeal and whether the defendant will suffer irremediable prejudice if the extension is granted: Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55]-[58].

Directorships of Melded Fabrics

4. The first plaintiff was a director of Melded Fabrics from late 2010 until 12 July 2013. In about July 2013, he was declared bankrupt. The second plaintiff is the first plaintiff’s daughter. She was appointed as a director of Melded Fabrics from 13 November 2013, by arrangement with her father, for the purpose of standing in to represent his interests in the company during his bankruptcy. On 16 June 2016 when the first plaintiff’s bankruptcy ended, he was re-appointed as a director of Melded Fabrics. I accept the second plaintiff’s evidence that on about 17 July 2016 she tendered to her father a letter of resignation as director. He did not at that time file with the Australian Securities and Investments Commission (“ASIC”) a notification of resignation of the second plaintiff. On 17 July 2018 the second plaintiff provided to her father a further letter of resignation, bearing that date. On 23 July 2018 the first plaintiff caused to be lodged with ASIC a notification of the second the plaintiff’s resignation, nominating 17 July 2018 as the “date of cessation”.

The defendant’s work, the assessment and the review

5. From 21 April 2016 onwards the legal work carried out by the defendant on instructions of the first plaintiff concerned a commercial dispute involving Melded Fabrics. By late April 2017 the dispute had given rise to proceedings against the company in the Equity Division of this Court. The first plaintiff instructed the defendant in the conduct of the defence of those proceedings and in the prosecution of a cross claim. The defendant’s work on the case continued, with ongoing instructions from the first plaintiff, until the dispute was settled on the terms of a deed entered into in early December 2018.

6. From then until 4 June 2019 the defendant did further work relating to implementation of the deed. On 4 July 2021 the defendant rendered an invoice to the plaintiffs and to Jayfield Pty Ltd (“Jayfield”). At all relevant times Jayfield held 41% of the issued shares in Melded Fabrics. It was the trustee of the BNS Trust, the nature and objects of which are not in evidence. The second plaintiff is a beneficiary of the trust but the evidence does not disclose whether that is a discretionary entitlement, a unit entitlement or any other form of beneficial interest. Attached to the defendant’s invoice was an itemised bill of 56 pages. The total amount of the invoice was $154,753.71, inclusive of GST and disbursements. Of the disbursements, counsel’s fees were $22,407. The invoice recorded a credit of $23,000 paid on account. The balance said to be owing was $131,753.71.

7. On 22 September 2021 the defendant filed with the Manager, Costs Assessment an application for assessment of his costs, as between solicitor and client. Such an assessment is governed by Pt 7 of the Application Act and Pt 4.3 Div 7 (comprising ss 196-204) of the Legal Profession Uniform Law 2014 (NSW) (“the Uniform Law”). Section 198(1)(c) of the Uniform Law, provides that the firm that carried out the legal services, in this case the defendant, may make an application for assessment. By force of s 199 of the Uniform Law, an assessment is required to be conducted by a costs assessor, in accordance with Pt 4.3 of the Uniform Law and the rules made under that Law and “any applicable jurisdictional legislation”. For the jurisdiction of New South Wales, the relevant legislation is the Application Act.

8. In the Application Act, costs that are to be assessed as between solicitor and client are referred to as “Uniform Law costs”. The defendant filed his assessment application in accordance with s 69 of the Application Act, naming as costs respondents the plaintiffs and Jayfield, both in its own right and as trustee of the BNS Trust. After affording the respondents an opportunity to state objections and make submissions and after considering limited objections made by the first plaintiff, on 5 January 2022 the assessor issued a total determination in the full amount of the defendant’s invoice, as rendered.

9. Section 205 of the Uniform Law provides that “an applicant for assessment”, which appears to be intended to include a respondent to an assessment application, may appeal or seek review of a costs assessor’s decision “in accordance with the applicable jurisdictional legislation”. The Application Act provides for review of an assessor’s decision in Pt 7 Div 5, comprising ss 82-86. On 20 April 2022 the first plaintiff filed an application for review.

10. In May 2022 the review panel members pointed out to the first plaintiff that the other costs respondents to the original assessment had not joined in the application for review. The first plaintiff proposed that he would amend the application, to include them. The panel members said that this would require a further application to the Manager, Costs Assessment, which would be out of time so far as the other proposed review applicants were concerned. The panel members proposed that, instead, they should act under s 69(1) of the Application Act to “include” the other parties who were before the original assessor “as interested parties to this review”, subject to each of them separately and independently confirming the following:

1.   that they wish to be so included, on the understanding that they will each become additional Review Applicants and will each be bound by the Panel’s determination of the Review Application …;

2.   their contact email, if they are acting for themselves, or the contact email for each of their legal representatives; or

3.   that they have appointed Robert Carkeek as their agent with full authority to represent their interests in this review.

11. Section 69(1) is as follows:

69 Consideration of applications

(1) A costs assessor must give an applicant, and any law practice or client or other person concerned, a reasonable opportunity to make submissions to the costs assessor in relation to the application, and give due consideration to any submissions so made.

12. It is doubtful that that section enabled the course that was taken. Section 69(1) appears to do no more than allow the review panel to afford an “other person concerned” with an assessment or review the opportunity to make submissions. The section says nothing about binding such persons to the review panel’s determination. However, the first plaintiff and the defendant agreed to the course proposed and on 17 May 2022 the second plaintiff provided to the panel a signed letter in the following terms:

Further to the above review application [referring to the first plaintiff’s application], and the Panel’s determination that it will include me, I agree to be an included party to the review and appoint Stephen Robert Carkeek as my agent with full authority to represent my interests.

13. The first plaintiff informed the panel that Jayfield had been placed in liquidation. The review proceeded with the first plaintiff as the only review applicant and on the basis that second plaintiff would be bound by their decision. No point about the efficacy of this has been taken since. Jayfield remains bound by the original assessor’s decision.

14. The review panel issued a certificate of determination on 23 September 2022, setting aside the original assessor’s certificate and substituting an amount of $134,697.71, with a credit of $23,000 for costs paid on account so that $111,697.71 was payable. The panel issued reasons on about the same date. On 4 October 2022 the Manager, Costs Assessment sent the certificate for the reduced amount to the parties.

Explanation of first plaintiff’s delay in filing the summons

15. The 28 days limited under UCPR r 50.3 for filing a summons to commence an appeal against the review panel’s decision expired on 1 November 2022. On 31 October 2022 the first plaintiff lodged with the Registry of this Court a summons naming both himself and Sophie Pamela Carkeek as plaintiffs, together with an application for waiver or postponement of the filing fee. The summons lodged was not in the form prescribed for commencement of an appeal under UCPR Pt 50. A registry officer so informed the first plaintiff by email of 16 November 2022, in which it was also stated that if consideration was to be given to waiver of the filing fee there would have to be an application in that behalf by both plaintiffs. On 25 November 2022 the first plaintiff filed a replacement summons on the correct form but this document still named Sophie Pamela Carkeek as a second plaintiff and no application for fee waiver was lodged by her. After further correspondence from the registry the first plaintiff eventually filed a summons on the correct form but naming only himself as the moving party. On 31 January 2023 that document was accepted in the registry, with the filing fee postponed. The summons was served on the defendant the same day.

Registration of the panel’s certificate as a judgment of the District Court

16. Section 87(2) of the Application Act provides that sub-s (2)-(6) of s 70 of that Act apply to a review panel’s certificate in the same way that those subsections apply to a certificate issued by an original assessor. Section 70 provides as follows, so far as relevant:

70 Certificate as to determination of costs to parties

(1)   On making a determination of costs, a costs assessor is to issue a certificate that sets out the determination and includes—

(a)   the amount of costs determined (including any GST component the costs assessor determines is payable) […]

[…]

(5)   In the case of an amount of money specified in a certificate that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid money. The rate of any interest payable in respect of that amount of money is the rate of interest in the court in which the certificate is filed.

17. Pursuant to ss 70(5) and 87(2) of the Application Act, the defendant filed the review panel’s certificate in the District Court on or before 30 January 2023. On the latter date the Principal Registrar entered judgment for the defendant against both plaintiffs for the certified amount of $111,697.71. On 31 January 2023 the defendant caused an Official Receiver to issue a bankruptcy notice to each of the plaintiffs, pursuant to s 41 of the Bankruptcy Act 1966 (Cth). The defendant served both a sealed copy of the District Court judgment and a copy of the bankruptcy notice on both plaintiffs by email on 21 April 2023. The plaintiffs were unaware of the entry of judgment until that time.

Explanation of the second plaintiff’s delay in joining the proceedings

18. In the meantime, a directions hearing in these proceedings had been conducted by the Common Law Registrar on 23 March 2023, at which counsel for the defendant submitted that the second plaintiff should be a party. The Registrar agreed and informed the first plaintiff that if Sophie Carkeek did not join as a plaintiff then the first plaintiff would have to take advice as to whether he should join her as a defendant. By 15 June 2023 when a further directions hearing took place, Sophie Carkeek had not been joined and the first plaintiff said that he opposed her joinder. Directions were made to enable the defendant to file a notice of motion for an order that she be joined. A notice of motion to that effect was filed by the defendant on 22 June 2023 but a week later the first plaintiff consented to an order for her joinder. Pursuant to the consent order the first plaintiff initially filed an amended summons naming both himself and Sophie Carkeek as plaintiffs but without her signature to the document. That was not rectified until the filing of an amended summons on 2 October 2023, which is the initiating process now before the Court.

Evaluation of the length of delay and of the explanation

19. The first plaintiff’s delay in filing a regular summons was three months. That is not particularly long and there is no indication that the delay was intentional on his part. It resulted from the plaintiff’s ineptitude as a self represented litigant. I cannot identify any significant prejudice to the defendant caused by the delay. The question whether time for filing should be extended in the first plaintiff’s favour must depend heavily upon whether his grounds are reasonably arguable. However, the question whether the second plaintiff’s grounds are arguable is also relevant because the plaintiffs’ respective applications for extension of time are interdependent. If the second plaintiff has a good case for extension, that should be taken into account in determining whether to extend time in favour of the first plaintiff, thereby to validate the initial filing of the summons on 31 January 2023. It is necessary that the initial filing should be within time in order for there to have been a competent proceeding to which the second plaintiff was joined from 29 June 2023.

20. The history of the second plaintiff’s role as a director of Melded Fabrics is outlined above and the course of proceedings before the review panel is recorded in the panel’s reasons of 22 September 2021. Those sources disclose that the first plaintiff has, throughout his dealings with the defendant, used his daughter’s name in actions that have significantly affected her legal position with respect to the costs dispute. He has exercised his own judgment independently of the second plaintiff in taking actions and refraining from taking other actions. The fact that the first plaintiff has conducted affairs relevant to the costs assessment process in the name of his daughter independently and without consulting her at each stage is confirmed in her affidavit of 1 September 2023. The second plaintiff conferred considerable authority on her father by signing the letter to the panel by which she constituted the first plaintiff her fully authorised representative. She neglected her own interests by failing at that time to take the objection that she now raises in grounds (3) and (4).

19. The circumstance of the second plaintiff having left matters in the first plaintiff’s hands provides an explanation for delay in instituting her appeal and excludes any inference of deliberateness, albeit that this delegation to the first plaintiff was ill-advised and careless. In the absence of irremediable prejudice to the defendant the Court should regard the delay on her part as explained by her unwise entrusting of the conduct of the costs dispute to her father. In her case, as with the first plaintiff, the exercise of the discretion to extend time will be primarily influenced by assessment of whether her grounds, being (3) and (4), are arguable.

The first plaintiff’s grounds (5), (6) and (7)

22. Relevantly to ground (5), pars 63-67 of the review panel’s reasons expose the calculations by which the panel first applied an hourly rate of $660, in place of the defendant’s claimed rate of $770, and then applied a further 2% discount to allow for six minute incremental charges in relation to work that may not have occupied a full six minutes. All the calculations were made on a GST-inclusive basis. There is no apparent error in the calculations. At p 15 of Ex SRC-4, exhibited to the first plaintiff’s affidavit sworn 11 January 2024, he has provided a schedule of recalculations purporting to show a GST error of $2,550. The schedule does not satisfy me that there is any reasonably arguable error even in this very small amount.

23. Grounds (6) and (7) concern the panel’s global approach of making a downward adjustment of the hourly rate and discounting by another 2%. That approach was open to the panel and was reasonable. In these grounds the first plaintiff seeks to open up item by item challenges where he submits that the professional costs charged were excessive by reason of the nature of the work done. The review panel invited the first plaintiff to make submissions in support of an item by item review, either in relation to all items or nominated items, if he wished to have the defendant’s bill examined upon that basis. The first plaintiff did not request an item by item approach and nor did he nominate any items that he wished to have examined on a specific basis. He took no objection to the panel’s intimation that they would proceed on a global basis in the absence of specific objections concerning individual items. In those circumstances grounds (6) and (7) must inevitably fail.

The first plaintiff’s ground (2)

24. In common with grounds (3) and (4), which are pressed by both plaintiffs, the first plaintiff’s ground (2) seeks to raise a contention that he is not contractually liable to the defendant for costs in any amount at all. In Pt 4.3 of the Uniform Law and Pt 7 of the Application Act, all the provisions governing assessment of Uniform Law costs and review of an assessment are concerned only with quantification. The provisions proceed on the assumption that the parties to an assessment or review of Uniform Law costs will be a legal practitioner and either a client who is liable to pay the practitioner for his services, pursuant to a contract of retainer or under principles of quasi contract or unjust enrichment, or a third party payer. Section 172 of the Uniform Law requires that the amount charged by legal practitioner – and hence the amount assessed – must be “no more than fair and reasonable in all the circumstances”. The assessment and review processes are concerned with arriving at a certified monetary amount that may, pursuant to ss 70 and 87(2) the Application Act, be converted to a judgment for that sum.

25. From these considerations it is plain that the existence of a legal obligation of a costs respondent to pay the legal practitioner’s costs is a jurisdictional requirement for a valid assessment or review. The first plaintiff’s ground (2) is a jurisdictional point. If it should be established by evidence that the defendant agreed to undertake the legal work that he did for no monetary payment but in consideration for acquiring a 5% share in a business, then there would be no liability of the first plaintiff to pay a fair and reasonable amount and the review panel would have had no jurisdiction to assess such an amount. The first plaintiff argued the existence of such an agreement, both before the assessor and before the review panel. Even if he had not done so, it would be open to him to agitate a question going to jurisdiction on this appeal: Amirbeaggi v EB [2023] NSWCA 108 at [52] (Basten AJA, Kirk JA and Simpson AJA agreeing).

26. The first plaintiff has tendered no admissible evidence of an enforceable agreement between the defendant as solicitor and either himself or anyone else as client, to the effect that legal work would be performed for Melded Fabrics in consideration for the defendant receiving a 5% interest in a business, without any other charge for his services. No such evidence was tendered to the assessor when this point was first raised, or to the review panel or in this Court. There is no admissible evidence of an oral communication that could be found to constitute such an agreement. There is no document recording or referring to an agreement along the lines alleged. In his affidavits and submissions, the first plaintiff has not particularised, let alone proved, the terms of the putative agreement. In what business was the defendant to have a 5% interest? When and by whom was the business to be established? Was the 5% to be a proportion of ownership of assets and a proportion of liability for debts of the business, or only a proportion of entitlement to profits? What scope of legal work was to be done and for whom under this agreement? The material before the Court does not provide answers to any of these questions.

27. The vagueness of the asserted agreement tells against it being enforceable, even if there were evidence to prove such sparse elements as are asserted by the first plaintiff. Further, the existence of an agreement to the effect alleged would appear to be contradicted by the Costs Disclosure and Costs Agreement that the first plaintiff and Melded Fabrics entered into with the defendant in early May 2018. That agreement is considered further below. Although the assessor and the review panel treated the agreement as a costs agreement that was void by operation of ss 174 and 178(1)(a) of the Application Act, its existence, bearing the signatures of both plaintiffs and the defendant, is a strong indication that no agreement was entered into for legal work to be carried out in exchange for a share in a business. Such an arrangement would be inconsistent with the agreement that was signed.

28. There is no evidentiary or factual substratum for the agreement asserted in ground (2) and the ground must be rejected.

Grounds (3) and (4)

29. In grounds (3) and (4) the plaintiffs raise more generally the question whether they are contractually liable to pay the defendant’s fees. For these two grounds they do not propound any alternative agreement but contend that they were not clients of the defendant and therefore did not become liable to pay his fees. “Client” is defined in the Uniform Law relevant parts of which are:

client includes a person to whom or for whom legal services are provided.

30. The plaintiffs also contend that they have not become liable to the defendant as “third-party payers”. That concept has a statutory meaning according to s 171 of the Uniform Law, as follows (extracted so far as relevant):

171 Third party payers

(1) For the purposes of this Law—

(a)   a person is a third party payer, in relation to a client of a law practice, if the person is not the client and—

(i)   is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client; or

(ii)   has already paid all or a part of those legal costs under such an obligation; and

(b)   a third party payer is an associated third party payer if the legal obligation referred to in paragraph (a) is owed to the law practice, whether or not it is also owed to the client or another person;

[...]

(2)   The legal obligation referred to in subsection (1) can arise by or under contract or legislation or otherwise.

31. It is not apparent upon the evidence before me that there is any basis for the first plaintiff to dispute that he was a client of the defendant. He requested the defendant to carry out all the work that is the subject of the defendant’s bill, as assessed. The bill is a business record of a nearly continuous stream of instructions from the first plaintiff to the defendant to carry out work in relation to the affairs of Melded Fabrics, in which the first plaintiff evidently had a significant interest as director and through Jayfield. On 19 December 2018 the ASIC register showed that 41% of the company’s issued share capital was held by Jayfield, of which the first plaintiff was a director from 25 June 2016 and sole director from 4 June 2018. The first plaintiff’s liability for the defendant’s costs does not depend upon the Costs Disclosure and Costs Agreement, considered below. There is no merit in ground (3) or ground (4) so far as the first plaintiff is concerned.

32. In contrast, the second plaintiff did not give instructions to the defendant and there is no evidence that she authorised her father to do so or that she had any beneficial interest in Melded Fabrics or that she gained any benefit from the defendant’s performance of legal work for her father or for Melded Fabrics on her father’s instructions. The defendant issued his invoice of 4 July 2021 to the second plaintiff and Jayfield, in addition to the first plaintiff, on the basis of the aforesaid agreement entitled “Costs Disclosure and Costs Agreement” that was entered into in writing on about 8 May 2018.

33. During May 2017 the defendant pressed the first plaintiff to deposit funds into his trust account to cover fees that had been incurred and would in future be incurred in the Melded Fabrics litigation. In reply, the first plaintiff asserted that Gregory Taylor, who had a substantial interest in Melded Fabrics, was also responsible for funding the litigation. It is not clear from the evidence whether any money was paid into trust in response to the defendant’s requests at this time. On 22 December 2017 the first plaintiff signed an endorsement on counsel’s fee disclosure letter, acknowledging liability on his own behalf and on behalf of Jayfield for fees that may become payable to counsel. The endorsement also contained a promise to indemnify the defendant in respect of his liability for counsel’s fees.

34. On 29 April 2018 the defendant submitted to the first plaintiff an initial version of the Costs Disclosure and Costs Agreement. The document was drafted for execution by Melded Fabrics, Jayfield “in its own right and as trustee”, the first plaintiff and Gregory Taylor. On 30 April 2018 the defendant conducted a search of Melded Fabrics on the ASIC database and, upon ascertaining that the second plaintiff was recorded as a current director, he sent to the first plaintiff an amended form of the Costs Disclosure and Costs Agreement, with the name of the second plaintiff added as a party and with provision for her to sign in her personal capacity. The document contained the following:

Costs Disclosure and Costs Agreement

Melded Fabrics Australia Pty Ltd

Jayfield Pty Ltd in its own right and as trustee

Stephen Robert Carkeek and Gregory Taylor and Sophie Carkeek

This document, together with our General Terms of Business, sets out the terms of our offer to provide legal services to you and constitutes our costs agreement and disclosure pursuant to the Legal Profession Uniform Law (NSW) (“the Uniform Law”).

A. Scope of Work

You have instructed us to act on your behalf in the Defence of Proceedings in the Supreme Court of NSW Plaint No 2017/00122029 and prosecute a cross claim against Protrade Pty Ltd.

Our costs agreement is to have commenced from February 2016.

Professional fees

[Rates and particulars were set out].

B. Disbursements and Internal Expenses

[Rates and particulars were set out].

C. Estimate of Professional Fees, Disbursements and Internal expenses

[An estimate, totalling $177,000, was set out together with a statement of factors that might cause variance from the estimate].

D. Costs Payable and Recoverable on Litigation Outcome

[A warning was set out concerning the risk that costs may not be fully recoverable against an opposing party and that the client may be liable to the opposing party for its costs].

You confirm that you agree to indemnify the Law Practice in respect of the fees of [counsel’s name] Barrister and acknowledge having read his cost agreement attached.

You confirm that you are each jointly and severally liable for payment of our costs and disbursements.

If you are signing on behalf of the client, you confirm that you are authorised to do so.

[Emphasis added]

35. The defendant signed the document next to the description “Law Practice”. On about 8 May 2018 it was signed on behalf of Melded Fabrics and Jayfield, each described as “Client”, by the first plaintiff as director of both companies. It was also signed by each of the plaintiffs in their personal capacities, each described as “Client”. The second plaintiff did not sign as a director of Melded Fabrics.

36. As can be seen from the above partial reproduction of the document, the Costs Disclosure and Costs Agreement was drawn as a multipurpose instrument, being in part a costs disclosure intended to comply with s 174 of the Uniform Law, in part a costs agreement intended to take effect under ss 179-185 of the Uniform Law and in part an attempt to document a retainer of the defendant by all of the named counterparties as clients and/or to bind one or more of the counterparties contractually as a third party payer, as envisaged by s 171 of the Uniform Law.

37. The Uniform Law contains the following provision concerning costs disclosure:

174 Disclosure obligations of law practice regarding clients

(1) Main disclosure requirement A law practice—

(a) must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and

(b) must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client—

together with the information referred to in subsection (2).

(2) Additional information to be provided Information provided under—

(a) subsection (1)(a) must include information about the client’s rights—

(i) to negotiate a costs agreement with the law practice; and

(ii) to negotiate the billing method (for example, by reference to timing or task); and

(iii) 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; and

(iv) to seek the assistance of the designated local regulatory authority in the event of a dispute about legal costs; or

(b) subsection (1)(b) must include a sufficient and reasonable amount of information about the impact of the change on the legal costs that will be payable to allow the client to make informed decisions about the future conduct of the matter.

(3) Client’s consent and understanding If a disclosure is made under subsection (1), the law practice must take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs.

[…]

(6) Disclosure to be written A disclosure under this section must be made in writing, but the requirement for writing does not affect the law practice’s obligations under subsection (3).

176 Disclosure obligations of law practice regarding associated third party payers

(1) If a law practice is required to make a disclosure to a client of the law practice under section 174 or 175, the law practice must, in accordance with subsection (2), also make the same disclosure to any associated third party payer for the client, but only to the extent that the details or matters disclosed are relevant to the associated third party payer and relate to costs that are payable by the associated third party payer in respect of legal services provided to the client.

(2) A disclosure under subsection (1) must be made in writing—

(a) at the time the disclosure to the client is required; or

(b) if the law practice only afterwards becomes aware of the legal obligation of the associated third party payer to pay legal costs of the client—as soon as practicable after the practice became aware of the obligation.

38. Before the review panel, the document signed on 8 May 2018 was the only purported disclosure that the defendant identified as fulfilling the requirements of s 174. The defendant has never contended that either of the plaintiffs is a third party payer. He has contended that the first plaintiff was a client from when the defendant first received instructions in April 2016 and that the second plaintiff became a client has a result of executing the document on 8 May 2018. The assessor considered that the Costs Disclosure and Costs Agreement did not comply with s 174 as a costs disclosure because it clearly had not been given as soon as reasonably practicable after instructions were first received and it purported to be retrospective in relation to the costs of work that had been done during more than two years prior to the date the defendant issued the document. That conclusion was not contested by the defendant before the review panel or on the hearing of the amended summons.

39. The Uniform Law contains the following provisions with respect to costs agreements, so far as presently relevant:

179 Client’s right to costs agreement

A client of a law practice has the right to require and to have a negotiated costs agreement with the law practice.

180 Making costs agreements

(1) A costs agreement may be made—

(a) between a client and a law practice retained by the client;

[…]

(2) A costs agreement must be written or evidenced in writing.

(3) A costs agreement may consist of a written offer that is accepted in writing or (except in the case of a conditional costs agreement) by other conduct.

(4) A costs agreement cannot provide that the legal costs to which it relates are not subject to a costs assessment.

184 Effect of costs agreement

Subject to this Law, a costs agreement may be enforced in the same way as any other contract.

185 Certain costs agreements are void

(1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division [Div 5, ss 179-185] is void.

Note

If a costs agreement is void due to a failure to comply with the disclosure obligations of this Part, the costs must be assessed before the law practice can seek to recover them (see section 178(1)).

(2) A law practice is not entitled to recover any amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received.

40. The assessor and review panel were required to treat any applicable costs agreement as prima facie evidence that the costs disclosed in the agreement were fair and reasonable: s 172(4). That did not apply in this case because of the following provisions of s 178(1):

178 Non-compliance with disclosure obligations

(1) If a law practice contravenes the disclosure obligations of this Part—

(a) the costs agreement concerned (if any) is void; and

(b) the client or an associated third party payer is not required to pay the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority; and

(c) the law practice must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed or any costs dispute has been determined by the designated local regulatory authority or under jurisdictional legislation; […]

41. The Costs Disclosure and Costs Agreement is the only evidence in the case that purports to document either a contractual retainer of the defendant by the second plaintiff, or a third party payer agreement under which the second plaintiff is obliged to pay costs of work done for Melded Fabrics. There is no evidence of any oral agreement, or request or other conduct giving rise to an implied agreement, under which the second plaintiff could be said to have retained the defendant or agreed to be a third party payer, so as to be liable for his costs.

42. The second plaintiff submits that the entire Costs Disclosure and Costs Agreement is void by operation of s 178(1)(a) of the Uniform Law, with the consequence that such provisions of it as purport to make the second plaintiff a client, or a third party payer or on any other basis liable to the defendant for costs, fall with the rest of the document’s provisions. I reject that argument. Section 178(1)(a) only has the effect of avoiding a “costs agreement”, meaning an agreement of the nature governed by Div 4 of Pt 4.3 of the Uniform Law. Apart from conditional costs agreements provided for under ss 181 and 182, which have no relevance to the present case, Div 4 of Pt 4.3 is addressed to agreements for the quantification of costs. That can be seen in s 172(4), which states that a costs agreement that has been prepared in compliance with Div 4, and that follows disclosure in compliance with Div 3, is prima facie evidence that the legal costs disclosed in such an agreement are fair and reasonable. Division 4 does not refer to agreements that constitute a retainer or establish the liability of a third party payer.

43. Hence, in the multifaceted Costs Disclosure and Costs Agreement, those parts that purport to create a retainer or a third party liability do not constitute and are not part of a “costs agreement” for the purposes of the Uniform Law. Such parts are not made void by operation of s 178(1)(a). The parts of the Costs Disclosure and Costs Agreement that are statutorily avoided are only those by which the parties agreed upon rates of remuneration.

44. An alternative analysis is that, even if the entirety of the Costs Disclosure and Costs Agreement should be treated as a costs agreement within the meaning of Pt 4.3 Div 4, so that the avoiding effect of s 178 may potentially apply to any part of it, the reasoning in Bingham v Bevan [2023] NSWCA 86 at 39]-[58] (Basten AJA, Meagher and White JJA agreeing) is applicable. Basten AJA held that s 178 does not render a costs agreement non-existent. Instead, a purposive approach must be taken in determining the extent to which the statutory avoidance operates. There would seem to be no objective of the Uniform Law that would justify avoiding provisions by which a retainer or third party payer liability is created. The statutory purpose of the avoidance provision is to eliminate the prima facie reasonableness of agreed rates or quantum and to require that costs be assessed, to the standard of what is fair and reasonable: s 178(1)(b). The relevant sections do not disclose an intention that the avoidance of a “costs agreement” should eliminate liability for costs altogether, by avoiding retainer provisions that may form part of the same instrument.

45. Although the operation of s 178 leaves intact those parts of the Costs Disclosure and Costs Agreement that are directed to establishing, in respect of the second plaintiff, either a client-solicitor retainer or a third party payer obligation, I have concluded that those provisions are ineffective to fix her with liability to pay the defendant’s costs. First, the document opens with the statement that it is “our offer to provide legal services to you”. If the second plaintiff should be taken to have accepted an offer in those terms by executing the document, then the concluded agreement could only be with respect to services provided after 8 May 2018. A considerable proportion of the bill assessed by the review panel is for work done during more than two years preceding that date. The document further states that “our costs agreement is to have commenced from February 2016” but the second plaintiff’s execution could not constitute an acceptance, with retrospective effect, of an offer to do work that had already been performed. The attempt to make a contract, by offer and acceptance, for past performance of services that preceded any request from the second plaintiff, is meaningless. I construe the words “our costs agreement is to have commenced” etc as a reference to the aspect of the document which is a costs agreement in the sense of Pt 4.3 Div 4 of the Uniform Law. In other words, the document purports to provide that the specification of rates of charge is agreed retrospectively. That is a part of the document that is rendered void by s 178.

46. Secondly, as the scope of work in the Costs Disclosure and Costs Agreement is expressly limited to the defence of the proceedings against Melded Fabrics, it does not extend to substantial work that was carried out over the year from April 2016 to April 2017 prior to commencement of the litigation. The document does not purport to make the second plaintiff liable for the costs of work other than the litigation, yet costs of such work are a significant proportion of the amount assessed by the review panel.

47. Thirdly, towards the beginning of the Costs Disclosure and Costs Agreement there appear the words “You have instructed us to act on your behalf in the Defence of Proceedings” etc. Those words are expressed as a statement of a past or existing fact, rather than constituting a current expression of request by the second plaintiff to the defendant. So far as the second plaintiff is concerned, the statement of fact is incorrect. There is no evidence that she ever gave any instructions to the defendant with respect to the litigation or any other work. Her execution of the Costs Disclosure and Costs Agreement cannot convert the erroneous assertion into a fact. The quoted words are not apt to create a retainer retrospectively, if such a thing could be done. Further, they do not express an agreement or undertaking by the second plaintiff that she instructs the defendant for the future. Her execution of the document containing these words therefore does not give rise to a retainer for subsequent legal work on the Melded Fabrics litigation.

48. In summary, it is not possible for a person to retain a solicitor retrospectively for work that he has already performed and, as for work to be performed after the date of the agreement, the provisions of the instrument are not expressed as and do not take effect as a retainer of the defendant by the second plaintiff. The mere insertion of the description “Client” next to the second plaintiff’s signature space is not sufficient to create a client-solicitor retainer, without more explicit provisions in the operative part of the document.

49. The question then arises whether the two clauses at the end of the Costs Disclosure and Costs Agreement are effective to bind the second plaintiff as a third party payer. For ease of reference, the last two clauses are reproduced, as follows:

You confirm that you agree to indemnify the Law Practice in respect of the fees of [counsel’s name] Barrister and acknowledge having read his cost agreement attached.

You confirm that you are each jointly and severally liable for payment of our costs and disbursements.

50. Those clauses amount to bare promises of indemnity and an assumption of liability, given for no consideration flowing to the second plaintiff. For want of consideration they are ineffective to create an enforceable obligation of the second plaintiff to pay any of the defendant’s costs.

51. The appeal is by way of a rehearing: s 89(4) of the Application Act. It is in the nature of such an appeal that the Court’s powers are exercisable only where the plaintiffs, as appellants, can demonstrate that, having regard to all the evidence now before the Court, the decision that is the subject of the appeal is the result of some legal, factual or discretionary error: Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40 at [23] (Gaudron, Gummow, McHugh and Hayne JJ); Gilmore Finance Pty Ltd v Aesthete No 3 Pty Ltd [2020] NSWCA 114 at [7]. The defendant submits that issues concerning the efficacy of the Costs Disclosure and Costs Agreement and whether the second plaintiff is liable to the defendant for any costs at all were not argued before the review panel and were not decided. Therefore, it is said, there cannot be any error in the review panel’s decision on those points and they are not matters with respect to which the Court could correct error. I do not accept that submission because the question whether the second plaintiff has any liability to the defendant for his costs is an issue going to the review panel’s jurisdiction and the second plaintiff cannot be prevented from raising it: Amirbeaggi v EB at [52].

Orders

52. Despite the lack of merit in all the grounds relied upon by the first plaintiff, an extension of time should be granted for the filing of his summons in order to ensure competence of the proceeding commenced on 31 January 2023, to which the second plaintiff became a party with effect from 29 June 2023. The second plaintiff has justified an extension of time in her favour by demonstrating the merit of grounds (3) and (4), so far as they relate to her.

53. The following orders will be entered:

1. Extend time for filing the summons by the first plaintiff up to and including 31 January 2023.

2. Extend time for the commencement of the second plaintiff’s appeal, by her joinder to the proceedings as a plaintiff, up to and including 29 June 2023.

3. Dismiss the appeal by the first plaintiff.

4. Order that the first plaintiff pay the defendant’s costs of the proceedings.

5. Uphold the appeal by the second plaintiff.

6. Order that the certificate of determination of review issued by the second and third defendants on 23 September 2022 and sent to the parties to the review by the Manager, Costs Assessment on 4 October 2022 be set aside insofar as it is issued against Sophie Pamela Carkeek, named in the said certificate as Interested Party.

7. Order that the defendant have liberty to deliver to the Associate to Fagan J and to serve upon the first plaintiff, within 14 days of the publication of these reasons, an affidavit deposing to his costs of these proceedings substantiating any amount that he may wish to claim by way of a specified gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW).

8. Direct that in the event that the defendant exercises the liberty under order (7), the first plaintiff deliver to the Associate and serve upon the defendant within 21 days of the publication of these reasons any affidavit evidence and/or written submissions concerning the amount claimed by the defendant by way of a specified gross sum.

9. Order that any assessment of a gross sum pursuant to orders (7) and (8) be undertaken on the papers.

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Decision last updated: 26 July 2024