Collection Point Pty Ltd v Cornwalls Lawyers Pty Ltd
[2012] VSC 492
•9 November 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COSTS COURT
S CI 2011 4893
| COLLECTION POINT PTY LTD (ACN 079 904 984) | Plaintiff |
| v | |
| CORNWALLS LAWYERS PTY LTD (ACN 120 152 123) trading as CORNWALL STODART | Defendant |
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JUDGE: | GARDE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 September 2012 | |
DATE OF JUDGMENT: | 9 November 2012 | |
CASE MAY BE CITED AS: | Collection Point Pty Ltd v Cornwalls Lawyers Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 492 | |
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COSTS COURT – Interim bills of costs – Construction of s 3.4.37 and s 3.4.38 of the Legal Profession Act 2004 (Vic) (“the Act”) – Dromana Estate Ltd v Wilmoth Field Warne(a firm) [2010] VSC 308 not followed – Application under s 3.4.38(6) of the Act.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Warne | Christopher Bunnett, Lawyers |
| For the Defendant | Mr M. Corrigan | Cornwall Stodart, Lawyers |
| For the Law Institute of Victoria as Amicus Curiae | Mr M. Bevan-John | Mr J. Barravecchio, Solicitor for the Law Institute of Victoria |
HIS HONOUR:
Introduction and summary
On 9 November 2009, Mr Hurkon (Harry) Ali issued proceedings in the Federal Court of Australia against Collection Point Pty Ltd (ACN 079 904 984) (“the plaintiff”). Mr Ali sought access to the books of the plaintiff under s 247A(1) of the Corporations Act2001 (Cth). Subsequently, Cornwalls Lawyers Pty Ltd (ACN 120 152 123) which trades under the name of Cornwall Stodart (“the defendant”) was engaged by the plaintiff as its solicitors in the Federal Court matter. The defendant acted as the plaintiff’s solicitors over the period from February 2010 until September 2010.
By a summons filed on 13 September 2011, the plaintiff sought review of nine bills of costs rendered by the defendant and dated between 25 February 2010 and 8 April 2011.
On 4 May 2012, Wood AsJ referred the application for costs review to a Judge of the Court pursuant to s 3.4.38(6) of the Legal Profession Act2004 (Vic) (“the Act”). The order included under other matters:
The applicant seeks to review a number of bills of costs, some of which were received more than 12 months prior to the filing of the Summons. A referral to a Judge of the Court is made pursuant to section 3.4.38(6) of the Legal Profession Act 2004 (“the Act”) as an order by a Judge extending time is required to review those bills on the basis of the interpretation of the relevant provisions in the Act adopted in Dromana Estate Limited v Wilmoth Field Warne [2010] VSC 308 (“Dromana”).
The applicant wishes to argue two matters: the issue of the extension of time under the Act but tied up in that issue is the question of whether an extension of time is necessary if Dromana was wrongly decided.
The Law Institute of Victoria intervened, was represented and participated in the hearing of Dromana in 2010 and accordingly, they should be on notice about the hearing of this matter.
The parties should be given an opportunity to consult with each other and formulate an appropriate question for the Court to consider at the time of the hearing of the referral under the Act.
A referral to a Judge of the “application” to review bills of costs received more than 12 months prior to 13 September 2011 is an option under rule 77.04 of the Supreme Court (General Civil Procedure) Rules 2005, as is a referral of “a question in a taxation” under Rule 63.51. It was decided that the referral under the Act with an appropriate question to be determined in the same hearing was the most appropriate course to adopt.
Following consultation between the parties, on 22 May 2012 Daly AsJ referred the following question to a Judge for hearing and determination:
Does s.3.4.37(2) of the Legal Profession Act 2004 permit the Applicant to review under s.3.4.38 the Respondent’s legal costs which are the subject of interim bills given more than 12 months before the lodgement of the Applicant’s application for costs reviews, on the basis that that application was commenced within the 12 month period after the giving of the final bill dated 8 April 2010 described in s.3.4.38(5) and the interim bills are to be taxed at the time of the taxation of the final bill?
Two questions arise for determination in these proceedings. The first is whether the Costs Court has jurisdiction to conduct a costs review without an extension of time having regard to the fact that the final bill is dated 8 April 2010 and was submitted within the 12 month period required under s 3.4.38(5) of the Act and all of the other bills are agreed to be interim bills under s 3.4.37 of the Act.
The second question arises under s 3.4.38(6) in the event that I decide that the interim bills are out of time under s 3.4.38(5), and having regard to the delay and reasons for the delay, whether it is just and fair for the application for review to be dealt with after the 12 month period. I will subsequently refer to these questions as the first and second questions.
At the hearing, Mr Bevan-John of Counsel sought to appear as amicus curiae on behalf of the Law Institute of Victoria (“the Institute”) and to present submissions in relation to the question referred for hearing and determination by Daly AsJ. The application to appear as amicus curiae was opposed by Mr Warne of Counsel who appeared on behalf of the plaintiff. Leave was granted to the Institute to appear as amicus curiae. Mr Corrigan of Counsel appeared on behalf of the defendant, and stated that the defendant adopted the submissions of the Institute. Mr Corrigan subsequently expanded on those submissions in oral argument.
Facts
The parties were content for the proceeding to be determined on affidavit. The affidavits and exhibits were tendered and accepted into the evidence. There was no cross-examination, and neither party sought to cross-examine any witness. I therefore accept the facts as stated in the affidavits and the exhibits. Both parties made submissions as to the significance and sufficiency of the evidence contained in the affidavits.
The bills sought to be taxed in the summons for costs review total $116,678.
The bills are as follows:
Date Amount Time after 14 September 2010 (i) 25 February 2010 $4,330 six and a bit months (ii) 29 June 2010 $9,296 two and a half months (iii) 30 July 2010 $29,352 one and a half months (iv) 23 August 2010 $14,625 three weeks (v) 31 August 2010 $34,998 two weeks (vi) 6 September 2010 $18,998 one week (vii) 28 September 2010 $3,990 within 12 months (viii) 29 November 2010 $1,089 within 12 months (ix) 8 April 2011 $200[1] within 12 months $116,678 [1]Disbursement only.
Of the total of $116,678, work the subject of bills given about three weeks or less prior to 14 September 2010 or after that date total $73,700 or 63% of the total amount of the bills sought to be taxed. Work the subject of bills given about six weeks or less prior to that date or after that date total $103,052 or 88%.
Counsel for the defendant contended that the summons for costs review filed on 13 September 2011 was out of time in relation to bills given between 25 February 2010 and 6 September 2010 inclusive. It was said that the summons was out of time in relation to these bills by periods of between one week in the case of the bill dated 6 September 2010 to a little over six months in the case of the bill dated 25 February 2010. The defendant admitted that the summons was given within time in relation to the bills dated 28 September 2010, 29 November 2010 and 8 April 2011.
Mr Scott a partner of Cornwall Stodart deposed that following an approach made on 4 February 2010 on behalf of the plaintiff, an initial fee estimate was provided by that firm of between $4,000 and $5,000 to provide an advice. This estimate related to advice in conference as to various issues in dispute in the proceedings and to the courses of action open to the plaintiff. The professional fees to be charged by the defendant were said to be based on a combination of expertise and time expended. Hourly rates were set out as:
Partners: | $500 - $580 |
Special Counsel: | $410 - $460 |
Senior Associates: | $320 - $400 |
Solicitors: | $220 - $400 |
Trainees: | $180 |
Law Clerk: | $170 - $190 |
In addition, the plaintiff would be required to pay expenses.
The defendant’s cost disclosure letter is dated 11 February 2010 and the letter of advice is dated 19 February 2010. Cornwall Stodart raised an invoice on 25 February 2010 in the amount of $4,330.
All of the invoices raised by the defendant were paid promptly typically within 30 days of invoice.
Mr Scott deposed that instructions were given to the defendant to act on or about 15 June 2010. An authority in favour of the defendant was forwarded to the previous solicitors seeking release of their files on 16 June 2010. On 17 June 2010, a notice of change of practitioner was filed and served.
The defendant made a second costs disclosure to the plaintiff on 30 July 2010. That costs disclosure was provided by email and related to an application for an Anton Piller order. It suggested that counsel’s fees in preparation for and attendance at a hearing in relation to an application for an Anton Piller order would be between $15,000 - $20,000. Other fees were identified including independent solicitors’ fees of $8,000 - $10,000; computer expert’s fees of $5,000; court issuing fee of $1,732 and transcript cost of $500. The defendant estimated that its fees for preparing affidavits, attending to executing the order and reporting to the court would be in the range of $20,000 - $30,000. The email also advised that subsequent interlocutory steps such as pleadings, discovery, mediation and trial would be necessary, and that it was expected that the court would set a truncated timetable for these interlocutory steps. The letter requested that the sum of $40,000 be deposited into the defendant’s trust account or a cheque provided in that sum in order that these monies could be held on account of the likely disbursements. Instructions by way of confirmation of willingness to give the usual undertaking were also sought.
The application for a search and seizure order was heard by Ryan J of the Federal Court of Australia on 2 August 2010.
A disc subsequently obtained from residential premises was found to contain information belonging to the plaintiff and Mr Bulzomi, a business partner of Mr Crupi, the director of the plaintiff.
The proceeding went to mediation on 9 August 2010. The matter settled after mediation on or about 3 September 2010.
In about October 2010, Mr Bulzomi requested the defendant to assume the conduct of other proceedings issued against him by the State Revenue Office. These proceedings had been on foot since 2005. On 1 December 2010, the plaintiff engaged the defendant to act in a new matter involving the State Revenue Office. At the time, officers of the State Revenue Office were attending at the plaintiff’s offices and demanding access to the premises to inspect records. Separate invoices were rendered by the defendant to the plaintiff in relation to the proceedings involving the State Revenue Office and were the subject of a separate summons for costs review in the Costs Court.
In his affidavits sworn 4 November 2011 and 1 May 2012, Mr Crupi deposed that he engaged the defendant on behalf of the plaintiff in February 2010. He said that the plaintiff was later advised that the matter was far more difficult and complex than originally anticipated. Mr Crupi began to receive what he considered to be very large bills from the defendant from July 2010. He found that the litigation was extremely stressful as there was a risk that the plaintiff could go into liquidation. This would result in 30 employees losing their jobs. This was exacerbated by the fact that Mr Ali had been a friend of Mr Crupi for several years prior to the litigation. Mr Crupi deposed that at that time he did not have the fortitude to begin investigating the invoices that the plaintiff received from the defendant. He was advised by the defendant that if the invoices were not paid within 30 days work would cease. He was also aware that from a practical point of view, it would have been extremely difficult for the plaintiff to change legal practitioners.
In or about May 2011, Mr Bulzomi advised him that he had received some very large invoices from the defendant in relation to a separate dispute that he had with the State Revenue Office. He suggested that Mr Crupi look very carefully at the invoices the plaintiff had received from the defendant.
In or about August 2011, Mr Bulzomi informed Mr Crupi that he had terminated his retainer with the defendant because of disputes over the defendant’s charges. Mr Bulzomi informed him that he would be taking action against the defendant for what he suspected was excessive overcharging. Mr Crupi then decided to take action against the defendant.
In or about August 2011, Mr Crupi instructed solicitors for the plaintiff to issue a summons against the defendant in respect of all invoices rendered by it including those invoices that were received by the plaintiff more than twelve months ago.
On the basis of the affidavits before me, I conclude:
· the date 12 months prior to the summons for costs review is 14 September 2010;
· even if the summons for costs review were out of time for some bills, the maximum period that any bill is out of time is a little over six months.
· 88% of the work the subject of the bills was given about six weeks or less before 14 September 2010 or after that date;
· there is no evidence or suggestion of any prejudice to the defendant occasioned by the delay;
· it is not suggested that the defendant’s files or records are unavailable, or that any member of the defendant’s firm or employee is unavailable to assist in the costs review;
· it is not suggested that the costs review is affected in any way by delay; and
· Mr Crupi did not make a complaint about the level of Cornwall Stodart’s fees until August 2011.
Relevant provisions of the Act
The first issue concerns the interpretation of the Act. Section 3.4.37 deals with interim bills, and provides:
3.4.37 Interim bills
(1) A law practice may give a person an interim bill covering part only of the legal services the law practice was retained to provide.
(2) Legal costs that are the subject of an interim bill may be reviewed under Division 7, either at the time of the interim bill or at the time of the final bill, whether or not the interim bill has previously been reviewed or paid.
Section 3.4.38 deals with application for costs review, and provides:
3.4.38 Application by clients or third party payers for costs review
(1)A client may apply to the Costs Court for a review of the whole or any part of legal costs.
(2)A third party payer may apply to the Costs Court for a review of the whole or any part of legal costs payable by the third party payer.
(3)An application for a costs review may be made even if the legal costs have been wholly or partly paid.
(4)If any legal costs have been paid without a bill, the client or third party payer may nevertheless apply for a costs review.
(5)An application by a client or third party payer for a costs review under this section must be made within 12 months after—
(a)the bill was given or the request for payment was made to the client or third party payer; or
(b)the costs were paid if neither a bill was given nor a request was made.
(6)However, an application that is made out of time, otherwise than by—
(a)a sophisticated client; or
(b)a third party payer who would be a sophisticated client if the third party payer were a client of the law practice concerned—
may be dealt with by the Costs Court if the Supreme Court constituted by a Judge of the Court within the meaning of the Supreme Court Act 1986, on referral by a Costs Judge or the client or third party payer who made the application for review, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for review to be dealt with after the 12 month period.
Part 3.4 is entitled “Costs Disclosure and Review”. Section 3.4.1 sets out the purposes of Part 3.4. The purposes are:
3.4.1 Purposes
The purposes of this Part are—
(a)to provide for law practices to make disclosures to clients regarding legal costs;
(b)to regulate the making of costs agreements in respect of legal services, including conditional costs agreements;
(c)to regulate the billing of costs for legal services;
(d)to provide a mechanism for the review of legal costs and the setting aside of certain costs agreements.
Section 3.4.17 concerns failures to disclose, and provides:
3.4.17 Effect of failure to disclose
(1)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been reviewed under Division 7.
Note
Under section 3.4.45, the costs of a review in these circumstances are generally payable by the law practice.
(2)A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been reviewed under Division 7.
(3)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed and the client or associated third party payer has entered into a costs agreement with the law practice, the client or associated third party payer may also apply under section 3.4.32 for the costs agreement to be set aside.
(4)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, then, on a review of the relevant legal costs, the amount of the costs may be reduced by an amount considered by the Costs Court to be proportionate to the seriousness of the failure to disclose.
(5)If a law practice retains another law practice on behalf of a client and the first law practice fails to disclose something to the client solely because the retained law practice failed to disclose relevant information to the first law practice as required by section 3.4.10(2), then subsections (1) to (4)—
(a)do not apply to the legal costs owing to the first law practice on account of legal services provided by it, to the extent that the non-disclosure by the first law practice was caused by the failure of the retained law practice to disclose the relevant information; and
(b)do apply to the legal costs owing to the retained law practice.
(5A)In a matter involving both a client and an associated third party payer where disclosure has been made to one of them but not the other—
(a)subsection (1) does not affect the liability of the one to whom disclosure was made to pay the legal costs; and
(b)subsection (2) does not prevent proceedings being maintained against the one to whom the disclosure was made for the recovery of those legal costs.
(6)Failure by a law practice to comply with this Division is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any Australian legal practitioner or Australian-registered foreign lawyer involved in the failure.
(7)Subsections (1) and (2) do not apply if the legal costs are or have been the subject of a civil complaint under Chapter 4.
Section 3.4.44A provides for the review of costs by the Costs Court:
3.4.44A Review of costs by reference to costs agreement
(1)The Costs Court must review the amount of any disputed costs that are subject to a costs agreement by reference to the provisions of the costs agreement if—
(a)a relevant provision of the costs agreement specifies the amount, or a rate or other means for calculating the amount, of the costs; and
(b)the agreement has not been set aside under section 3.4.32—
unless the Costs Court is satisfied—
(c)that the agreement does not comply in a material respect with any applicable disclosure requirements of Division 3; or
(d)that Division 5 precludes the law practice concerned from recovering the amount of the costs; or
(e)that the parties otherwise agree.
Section 3.4.39 deals with costs review by a law practice of another law practice and provides:
3.4.39 Application for costs review by law practice retaining another law practice
(1)A law practice that retains another law practice to act on behalf of a client may apply to the Costs Court for a review of the whole or any part of the legal costs.
(2)If any legal costs have been paid without a bill, the law practice may nevertheless apply for a costs review.
(2A)An application for a costs review may be made even if the legal costs have been wholly or partly paid.
(3)An application under this section must be made within 60 days after—
(a)the bill was given or the request for payment was made; or
(b)the costs were paid if neither a bill was given nor a request was made.
(4)An application cannot be made under this section if there is a costs agreement between the client and the other law practice.
History of Legislation
Common law position
At common law, a retainer to act in litigation was regarded as an entire contract, so that there was no right to retain remuneration until the particular legal services had been completed. The general rule was that when retained by a client, a solicitor undertook to complete the business for which he was retained.[2] Completion of the business was a condition on which the payment of costs depended. The obtaining of judgment went to the whole consideration. Costs were not taxed until after judgment, and the client got no benefit until judgment.
[2]Re Romer & Haslam [1893] 2 QB 286, 298 (Bowen LJ); Rakusen v Ellis, Munday and Clarke [1912] 1 Ch 831, 837 (Cozens-Hardy MR); Caldwell v Treloar (1982) 30 SASR 202, 208–10 (Walters J); Chisholm v State Transport Authority (1986) 41 SASR 317, 318–9 (Legoe J); O’Halloran v Stephen (1991) 7 WAR 477, 483–4 (Pidgeon J); McGowan v Commissioner of Stamp Duties (2001) [2002] 2 Qd R 499 (McPherson JA); Trustees of the Legal Contribution Trust v Bailey [2004] WASC 175 [60] (Le Miere J); Baker v Legal Services Commissioner [2006] 2 Qd R 249 [3] (McPherson JA).
As to interim bills, Oliver’s Law of Costs stated:[3]
In a common law action, a solicitor is not entitled to deliver a bill until the work is completed, as the contract is an entire one; but in equity there may be a break which entitles the solicitor to deliver a bill up to that time. Where a series of bills are delivered, they may form a continuous bill so that the date of delivery of all is the date of delivery of the last.
[3]L L Oliver, Law of Costs (Law Book, 1960) 21-2 (footnotes omitted).
Supreme Court Act 1958 (Vic)
The operative provisions were found in ss 93-103 of the Supreme Court Act 1958 (Vic) (“the 1958 Act”). Section 93 provided for taxation on the application of the party ”chargeable by any bill” within one month of service. Section 94 gave to a Judge the power to refer a bill to be settled and taxed by the Taxing Master unless it had been the subject of a judgment. On application by the party chargeable made more than 12 months after service of the bill, the reference could be made only in ”special circumstances”. Section 100 provided that no bill previously taxed should again be referred to taxation, except by order of a Judge. Section 101 provided that payment of a bill did not preclude a Judge from referring a bill for taxation if the special circumstances of the case required it, but only if the application for referral was made within 12 months after payment.
Supreme Court Act 1986 (Vic)
Section 61 of the Supreme Court Act1986 (Vic) (“the 1986 Act”) provided:
(2) A solicitor may draw and serve on the party to be charged a bill of costs (including an interim bill of costs covering part only of the work which the solicitor has been retained or employed to perform) …
…
(10) Even if an interim bill of costs has been paid or taxed, it may be taxed as part of the taxation of the bill of costs covering the whole of the work which the solicitor has been retained or employed to perform.
This section made provision for interim bills of costs to be taxed as part of the taxation of the bill of costs concerning the whole of the work even if the interim bill had been previously paid or taxed.
Section 71(1) of the 1986 Act provided:
On application to the Taxing Master—
(a) within two months of a solicitor’s bill of costs being served; or
(b) with the written consent of the solicitor, outside that time—
the party chargeable with the bill is entitled to obtain from the Taxing Master an appointment for the taxation of the bill.
Section 74 provided:
(8) Except in special circumstances, an order must not be made for the taxation of a bill of costs (other than an interim bill of costs) which has already been taxed.
(9) In special circumstances an order may be made for the taxation of a bill of costs (other than an interim bill of costs) which has been paid but in no case may such an order be made if the application for it is made more than 12 months after the payment.
A taxation as of right was available within two months of service of the bill. An interim bill could be taxed by the client when delivered, and could be taxed again with the final bill.
Legal Practice Act1996 (Vic)
The Legal Practice Act1996 (Vic) (“the 1996 Act”) came into force on 1 January 1997. Section 109 dealt with interim bills of costs and provided:
(1) A legal practitioner or firm may give a person an interim bill of costs covering part only of the legal services the practitioner or firm was retained to provide.
(2) An interim bill may be assessed under Division 5.
(3) An interim bill may be assessed under Division 5 as part of the assessment of the final bill, whether or not the interim bill has previously been assessed or paid.
Section 115 provided:
115.Person may apply for assessment of a bill of costs
(1) Any of the following may apply to the Taxing Master for the assessment of a bill of costs of a legal practitioner or firm—
(a) a person who has been given the bill of costs by the practitioner or firm;
…
(2) An application under sub-section (1) must be made—
(a) within 2 months after the bill of costs was given or the costs were paid (whichever is earlier); …
Section 116 provided:
116. Court may order assessment of costs
(1) The Supreme Court … may order—
(a) that the bill of costs be assessed by the Taxing Master;
…
(3) Except in special circumstances, the Court must not order that a bill of costs be assessed if the application under sub-section (1) was made—
…
(b) more than 12 months after the bill was given …
(4) Except in special circumstances, the Court must not order the assessment of a bill of costs (other than an interim bill) that has already been assessed.
(5) If a bill of costs (other than an interim bill) has been paid, the Court may order the assessment of the bill only in special circumstances and in any event no later than 12 months after the payment.
Such a scheme gave the client every opportunity. The client could require the assessment of the interim bill on receipt or wait until the final bill was given before proceeding to assessment. The right to have an interim bill assessed twice, whether or not the interim bill had been paid, gave the client the opportunity not only to assess the bill in the course of the litigation but also to wait until the end of the proceeding so that the interim bill could be assessed at the same time as the final bill when the outcome of the litigation and the overall cost was known.
Legal Profession Act2004 (Vic)
The relevant sections of the Legal Profession Act 2004 (Vic)[4] (“the 2004 Act”) commenced on 12 December 2005. The Explanatory Memorandum stated:[5]
In broad terms, this Bill seeks to implement a new regulatory framework for the legal profession in Victoria while simultaneously implementing national model provisions.
…
The national reforms contained in this Bill come out of the National Legal Profession Project sponsored by the Standing Committee of Attorneys-General.
[4]Act No. 99 of 2004.
[5]Explanatory Memorandum, Legal Profession Bill 2004 (Vic) 1.
The Explanatory Memorandum also stated:[6]
[6]Ibid 59-60.
Clause 3.4.37 provides that a law practice may give a person an interim bill. Legal costs that are the subject of an interim bill may be reviewed under Division 7.
Clause 3.4.38 provides that a client may apply to the Taxing Master for a review of the whole or part of a bill of costs. The application for a costs review may be made even if the legal costs have been wholly or partly paid. An application for costs review must be brought within 60 days after the bill was given or the request for payment was made or the costs were paid …
The Explanatory Memorandum made it clear that the 2004 Bill was implementing national model provisions and a new regulatory framework for the legal profession.
Section 3.4.37 of the 2004 Act provided that interim bills might be reviewed at the time of the interim bill or at the time of the final bill, whether or not the interim bill had previously been reviewed or paid.
Section 3.4.38(4) allowed a sixty day period for the assessment of bills of costs. Section 3.4.38(5) provided for applications made out of time to be dealt with by the Taxing Master unless in all the circumstances, unfair prejudice would be caused to the law practice.
The 2004 Act was amended by the Legal Profession Amendment Act 2007 (Vic)[7] (“the 2007 Act”). The Explanatory Memorandum stated:[8]
[7]Act No. 12 of 2007.
[8]Explanatory Memorandum, Legal Profession Amendment Bill 2007 (Vic) 1.
This Bill seeks to amend the Legal Profession Act 2004 to reflect amendments to the national model provisions that form part of the Act, and generally to improve the operation of the Act.
…
Victoria has agreed to use its best endeavours to introduce legislation to give effect to core national model provisions, as well as to any amendments to those provisions. Core provisions are those that have been identified as requiring consistency across all jurisdictions.
…
The Bill therefore provides for the adoption of amended "core" national model provisions and any "non-core" national model provisions that Victoria has already adopted.The amendments to the Act based on the national model provisions will improve national consistency in legal profession regulation across Australia …
Section 1 of the 2007 Act provided:
The purpose of this Act is to amend the Legal Profession Act 2004 as a result of amendments to the national model provisions for the regulation of the legal profession and generally to improve the regulation of the profession.
The adoption of national model provisions assists in identifying those provisions where a uniform approach to interpretation might be thought to be most desirable. The undertakings of the participating States were principally in relation to core provisions. As to the new s 3.4.38, the Explanatory Memorandum commented:[9]
Clause 56 substitutes section 3.4.38 of the Principal Act in accordance with amendments to the national model provisions to set out how and when third party payers may apply for costs reviews. The amendment also increases the time for clients and third party payers to apply for a costs review from 60 days to 12 months. Out-of-time applications may be made with leave of the Supreme Court.
[9]Ibid 18.
The extension of the time for making an application for costs review from 60 days to 12 months was a significant extension of time in favour of clients.
The 2004 Act was enacted as a result of Victoria’s participation in a cooperative scheme for nationally consistent legislation regulating the legal profession. The model legislation involved core and non-core provisions. Section 3.4.37(2) was a non-core provision.[10] Sections 3.4.38(5), 3.4.39(3) and 3.4.40(3) were core provisions. However, a provision similar to s 3.4.37(2) is found in legislation in all other States and Territories except for South Australia,[11] so that the distinction between core and non-core provisions has reduced application in relation to s 3.4.37(2).
[10]The Explanatory Memorandum to the Legal Profession Bill 2004 (Vic) at 127 distinguished between: core provisions requiring textual uniformity to the maximum extent possible, marked CU (“Core Uniform”); core provisions that are intended to be adopted, but not requiring textual uniformity, marked CNU (“Core Not Uniform”); and provisions that are optional, marked NC (“Not Core”). The Explanatory Memorandum to the Legal Profession Amendment Bill 2007 (Vic) at 1 provided for the adoption of amended “core” national model provisions and any “non-core” national model provisions that Victoria has already adopted (emphasis added).
[11]See s 293 of the Legal Profession Act 2006 (ACT), s 334 of the Legal Profession Act 2004 (NSW), s 328 of the Legal Profession Act 2006 (NT), s 333 of the Legal Profession Act 2007 (Qld), s 317 of the Legal Profession Act 2007 (Tas) and s 293 of the Legal Profession Act 2008 (WA).
The present form of the Act permits a costs review to be made within 12 months after the bill is given.[12] The Costs Court may hear an application made out of time if a Judge of the Court determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for review to be dealt with after the 12 month period.[13]
[12]Section 3.4.38(5) of the Act.
[13]Ibid s 3.4.38(6).
The discretion contained in s 3.4.38(6) is analogous to that contained in ss 23A and 27K of the Limitation of Actions Act 1958 (Vic).[14] It involves consideration of the listed considerations and a balancing of the interests of practitioners and clients. The special circumstances requirement of the 1986 Act and the 1996 Act has been replaced by the determination of whether it is just and fair for the application for review to be made out of time.
[14]The Court may grant an extension under those sections “if it decides that it is just and reasonable to do so” (emphasis added).
Section 3.4.37 of the 2004 Act was not altered by the 2007 Act. Continuing provision is made for clients to review interim bills when first provided or at the time when the final bill is reviewed or both. Even though the time limited for the application for costs review was extended from 60 days to 12 months, the Court continues to have a discretion to extend time even further if it is just and fair to do so.
Costs disclosure
The disclosure obligations within Division 3 of Part 3.4 of the Act are significant and include: [15]
(a)an obligation to disclose an estimate of the total legal costs or, if that is not reasonably practicable, a range of estimates into which the total legal costs might fall, and an explanation of the major variables which might affect the calculation of those costs;[16] and
(b)an obligation before or as soon as reasonably practicable after retaining another law practice (such as briefing counsel) to make similar disclosures as are required by ss 3.4.9(1)(a), (c), (e).[17]
[15]Certain disclosure obligations are not owed to “sophisticated clients” (see ss 3.4.12(1)(c)-(d) and s 3.4.2 definition of ”sophisticated client”), or to associated third party payers in matters where disclosure is not owed to the client (s 3.4.18A). Certain disclosure obligations are not owed in certain other situations (e.g. pro bono retainers), but some are owed to every client and every associated third party payer (e.g. the s 3.4.13 obligation to disclose what clients will receive if an offer of compromise is accepted).
[16]Section 3.4.9(1)(c) of the Act.
[17]Ibid s 3.4.10(1).
In litigation matters, there are additional disclosure obligations:
(a)to disclose an estimate of “the range of costs that may be recovered if the client is successful in the litigation” and, “the range of costs the client may be ordered to pay if the client is unsuccessful”;[18] and
(b)to disclose before a settlement is executed, a reasonable estimate of the amount of legal costs payable by the client if the matter is settled, and a reasonable estimate of any contributions towards those costs likely to be received from another party.[19]
[18]Ibid s 3.4.9(1)(g).
[19]Ibid s 3.4.13.
Failure by a law practice to comply with any of these disclosure obligations may have considerable significant consequences for the law practice including:
(a)the setting aside of a costs agreement where it is found that the costs agreement is not fair or reasonable;[20]
(b)the review of the legal costs against a court scale or the Practitioners Remuneration Order if there is non-compliance in a material respect with the applicable disclosure requirements;[21] and
(c)the reduction by the Costs Court on a costs review of the relevant legal costs by an amount considered by the Costs Court to be proportionate to the seriousness of the failure to disclose.[22]
[20]Ibid ss 3.4.17(3) and 3.4.32.
[21]Ibid s 3.4.44A(1)(c).
[22]Ibid s 3.4.17(4).
It is apparent that the Act regards compliance with the disclosure obligations within Division 3 as important with significant sanctions potentially arising in the event of non-compliance. If a law practice fails to comply with its Division 3 obligations, the results can be serious for the law practice when the costs review is undertaken.
Costs review by Costs Court
Division 7 of Pt 3.4 of the Act provides for the review of legal costs. Section 3.4.38 deals with client and third party payer-initiated taxations, ordinarily of solicitors’ fees. Section 3.4.39 deals with law practice initiated taxations of other lawyers’ fees, and is the usual vehicle for the taxation of counsel’s fees.[23] Section 3.4.40 deals with applications by a law practice for taxation of the law practice’s own bill.
[23]Kong v Henty Jepson & Kelly Pty Ltd (Unreported, Supreme Court of Victoria, Wood AsJ, 4 April 2011); I.J.R. Homes v MDM Legal Services SCI (Unreported, Supreme Court of Victoria, Wood AsJ, 12 September 2011); Ipex ITG Pty Ltd (in liq) (recrs apptd) v McGarvie [2011] VSC 675.
Section 3.4.38 is the main provision for costs reviews by clients or third-party payers or by the executors, administrators and trustees of the estates of such persons.[24] Subsection (1) says “[a] client may apply to the Costs Court for a review of the whole or any part of legal costs.” Section 3.4.38(2) affords to associated third party payers the opportunity to seek costs review.
[24]Section 3.4.38(10) of the Act.
Sections 3.4.38(7)–(9) deal with third party payer costs reviews. In a costs review initiated by an associated third party payer, the law practice is to participate in the costs review in the same way as in a client-initiated costs review:[25]
[25]Ibid s 3.4.38(8)(c).
Section 3.4.39 is the vehicle for costs reviews by solicitors of counsel’s fees and the fees of other law practices retained to act on behalf of clients.
Relevant decisions in Victoria and elsewhere
In Retemu Pty Ltd v Ryan,[26] K Coorey DCJ of the District Court of New South Wales, gave consideration to s 334 and s 350(5) of the Legal Profession Act2004 (NSW), provisions in similar terms to s 3.4.37 and s 3.4.38(6) of the Act.
[26](Unreported, District Court of New South Wales, Coorey DCJ, 16 April 2010) (“Retemu”).
Judge Coorey held:[27]
s.334 provides for the interim bills to be assessed when the final bill is assessed. Sub-section (2) of section 334 seems to recognise this because it provides that there can be an application for a costs assessment of an interim bill even if the interim bill has been paid by the client.
[27]Ibid 9 (emphasis in original).
Later, His Honour accepted the client’s submissions as to the interpretation of s 334:[28]
[28]Ibid 14-5 (emphasis in original).
I am satisfied for the reasons set out below that s.334 allows all interim bills to be assessed either at the time of the interim bill or at the time of the final bill:
(i) I am persuaded by the client’s submissions above that the solicitors submission that s.334 was enacted merely to provide an ouster of the ‘entire contract’ principle is not consistent with the law at the time s.334 came into existence. The solicitor’s submission ignores subsection (2) of s.334 which allows interim bills to be assessed at the time of the final bill. I accept the client’s submission that if s.334 was merely designed to allow a solicitor to give an interim bill there would have been no need or no reason to add subsection (2)
(ii) I accept the client’s submission that if the solicitor’s interpretation of s.334 was correct, it would mean that in many extended matters where there was a ‘continuing relationship’ the client would not be allowed to wait for the final bill before making an application for an assessment of costs.
(iii) I accept the client’s submission that there is no conflict between s.334 and s.350 (12 month time limit). S.334 simply allows a client to make an application for an assessment of the interim bills and the final bill at the time of the final bill; the application for assessment is bound by the limitation period of 12 months in s.350. The application for assessment of the final bill must be made within the 12 month limitation.
(iv) I accept the client’s submission that s.334 has a practical and useful purpose because in allowing all bills to be assessed at the same time it enables scrutiny of the work that has been done and scrutiny of moneys that have been claimed for or paid.
In Dromana Estate Ltd v Wilmoth Field Warne,[29] Wood AsJ considered the interaction between s 3.4.37 and s 3.4.38. As His Honour noted:[30]
Prior to the 9 May 2007 amendment to the Act, the time limit specified in s.3.4.38(5) was 60 days and in the regime prior to December 2005 under the Legal Practice Act 1996 it was two months (s.115(2)(a)). Under the present Act therefore there was a significant shift in favour of the client in relation to the time limit for review. The Explanatory Memorandum for the 2007 amendments makes it clear that the intention of the amendment to the time limit in 3.4.38 was to conform with the “national model provisions”.
[29][2010] VSC 308 (“Dromana Estate”).
[30]Ibid [9].
As to the definition of the terms “interim bill” and “final bill” contained in s 3.4.37, Wood AsJ concluded:[31]
Both the terms “interim bill” and “final bill” first appear in s.3.4.37, that is, the section immediately before s.3.4.38 of the Act. Neither of these terms is defined in the Act but it is clear that the legislation recognises these two concepts. In my view the use of the word “bill” in the next section without differentiation between interim or final must as a matter of logic mean that the term bill used in 3.4.38 includes both an interim bill and a final bill. In other words the time limit for review for either is 12 months.
[31]Ibid [12].
Associate Justice Wood then concluded:[32]
On the plaintiff’s argument there is no time limit to reviewing any interim bill provided the review of the final bill is sought within 12 months. This scenario was referred to in argument as the “piggy back” concept. There is no obligation in the Act to advise a client of this right if it exists. The obligation is confined to Division 7 review and any time limits.
A significant portion of the Act is in the nature of consumer protection legislation and one would expect the Act to contain an obligation to advise the client of all their rights and for those rights to be made clear. The absence of any obligation to advise of this “piggy back” scenario is conceded by the plaintiff – see paragraph (b) on page 11 of their written submission which states “There is no disclosure requirement that the client be advised of the ability to piggy back interim bills to the review of the final bill”.
The absence of a requirement to advise of any “piggy back” option in my view lends support to the argument that the 12 months’ limitation applies to the review of interim and final bills and that 3.4.37 should be given a restrictive interpretation subordinate to 3.4.38, particularly when the review option and 12 month limit are required to be included in interim bills. It would be nonsensical to have to advise a client of a 12 month limit on seeking a review of any bill (interim or final) but keep silent about a more significant right which is an almost unrestricted avenue to review any interim bill out of time (apart from the requirement that the final bill be reviewed within 12 months). The obvious answer to this is there is no such unrestricted right and 3.4.37 has limited application.
[32]Ibid [17]-[19].
Referring to the ruling in Retemu, His Honour concluded:[33]
[33]Ibid [21]-[28].
The problem I see with this ruling is that it assumes that the word “bill” in 3.4.38(5) only means “final” bill. In my view the language in 3.4.38 (5) is clear and “bill” must mean interim or final bill as specifically outlined in paragraph 12 above.
Having come to that conclusion, what does 3.4.37 mean, what work does it do and what rights does it confer? Would this construction of 3.4.38 render 3.4.37 nonsensical?
Subparagraph 3.4.37(1) gives the solicitor the right to render interim bills, notwithstanding that the work they were retained for has not been completed. This creates a benefit for the client allowing them to monitor and review bills as the retainer proceeds with any previous costs estimates in mind. It confers a benefit on the solicitor as it enables them to be put in funds in the manner of progress payments without carrying all costs until completion of the retainer.
Sub-paragraph 3.4.37(2) enables an interim bill to be reviewed at the time it is delivered and also at the time the final bill is reviewed, even if the interim bill has been paid or if it has been previously reviewed. This is all subject, however, to the application to review both the interim bill and the final bill being filed within 12 months of the bills being received. In practice this might be a small opportunity and convey a small right but the section can still sit with 3.4.38.
It is conceded by the plaintiff that 3.4.37 is a “non core” provision (see paragraph (c) on page 11 of their written submission). In my view 3.4.37, which is a non core provision in the national scheme, cannot be interpreted in such a way to undermine a core provision that is intended to achieve national consistency in the balance between the interests of clients and interests of solicitors. In other words, the tail (a non core provision) should not wag the dog (the core cornerstone review provision).
Section 3.4.37 is subject to the overarching effect of 3.4.38 and cannot be interpreted to mean that provided a final bill is filed within 12 months, all interim bills in a given matter going back an unlimited number of years can be reviewed. If this is intended then the legislation should have made such meaning clear, the disclosure of this right should be mandated and the word “final” should have been inserted in 3.4.38.
Much has been made of the need to recognise the necessity to preserve the relationship with the solicitor by allowing the client the option to exercise their rights at the end of the retainer and not to jeopardise the relationship by querying a bill when it arises. In my view the extension of the time limit by a factor of six to 12 months provides some comfort in this regard.
Further, in the case of a “sophisticated client” the general comment could be made that the solicitor is more dependant or vulnerable in that relationship with the client. By contrast in the case of an individual the general comment could be made that this is reversed, that is to say, the client is the relatively less powerful party. The restriction for a “sophisticated client” to be able to review only within 12 months makes sense when viewed in this light. Equally, the fact that an individual has the option of applying to extend the time beyond the 12 months also makes sense. Any reluctance to seek review within the 12 months based on for example, the imminent trial of the matter may well provide a justification for an extension in the case of an individual.
Mention is then made of Form 3B produced by the Legal Services Commissioner under the Legal Profession Regulations2005 (Vic):[34]
It is also worthy of comment that the prescribed Form 3B produced by the Legal Services Commissioner under auspices of the Legal Profession Regulations 2005 also makes no reference to any unrestricted right to tax old interim bills irrespective of when they were delivered at the time of taxation of the final bill. This is consistent with the disclosure obligations in the Act and the view that any rights conferred by 3.4.37 are so insignificant that they do not warrant communication or disclosure.
[34]Ibid [29].
Finally, His Honour described the status of the interim bill:[35]
In relation to the second or alternative argument that the defendant identified (see paragraph 7 above), it is put that if a ruling were made that an application to review an interim bill did not have to be initiated within 12 months if the review of the final one was initiated within 12 months, then the bills marked interim were in effect final and could therefore not be reviewed out of time. The issue of what does or does not constitute an interim or final bill is not clear cut. Neither term is defined in the Act. The defendant cited a number of Canadian cases on the basis that there was said to be no Australian or UK authorities dealing with the issue (see Hawkins & Hawkins v Bartlett & Co, Olsson v Morin both Supreme Court of British Columbia and Robertson, Ward, Suderman & Bowes v British Columbia Transit (British Columbia Court of Appeal).
Assuming the Canadian authorities accurately describe the legal position as to what prevents a bill marked interim from being regarded as interim, there remains the issue of what constitutes a final bill. Is it the last one before a retainer is terminated? Is it the last one rendered when the solicitor refuses to provide a final one after a reasonable time? It is undesirable for a client’s rights to review a bill to be determined by the timing of when a bill is rendered by a solicitor. If the “piggy back” scenario is open to a client then a solicitor might refuse to render a final bill in order to avoid this scenario. The last “interim” bill might then conceivably be out of time for review by the time it is then construed to be final.
The rights of a client ought to be clear and a regime that enables a solicitor to attempt to manipulate the rights of a client by timing the delivery of a bill to their own advantage does not satisfy the basic tenet of consumer protection legislation. A solicitor who delivers a bill marked “interim” is representing it to be just that. The Canadian cases reach the conclusion that how the bill is marked is not definitive and that the answer is to be determined by substance not form. A solicitor ought not to be able to avoid the consequences of legislation by arguing at the time of the review of a bill that a bill marked “interim” (consistent with a term in the Act) had a completely different character at the time the client seeks to review it.
This point has become moot however because I have determined that the 12 month period applies to all bills. The question of whether the bills predating 17 November 2008 are interim or final would only be an issue if the plaintiff’s “piggy back” argument was accepted.
[35]Ibid [31]-[34] (footnotes omitted).
In Turner v Mitchells Solicitors and Business Advisers Qld,[36] McGill DCJ followed Retemu. In rejecting the reasoning of Wood AsJ in Dromana Estate, His Honour stated that there would be no point to s 333(2) of the Legal Profession Act 2007 (Qld) (“the Qld Act”), which is the equivalent of s 3.4.37(2), unless it had the effect of overriding the limitation in s 335(5) of the Qld Act (the equivalent of s 3.4.38(5)). He considered that the term “bill” in s 335(5) of the Qld Act encompassed both interim and final bills and that, in the absence of s 333(2), the applicant would be out of time. His Honour concluded that s 333(2) of the Qld Act would have no work to do if the Victorian interpretation were adopted and held that such an interpretation should be avoided.[37]
[36][2011] QDC 61 (“Turner”).
[37]Ibid [18].
In Golder Associates Pty Ltd v Challen,[38] Samios DCJ again followed Retemu. His Honour held:[39]
[38][2012] QDC 11.
[39][35]-[41] (emphasis in original).
In Turner’s case his Honour Judge McGill in my opinion, accepted a construction of the relevant provisions of the LPA such that an assessment can be ordered of all the interim bills once there is a final bill and an application is made within 12 months of that final bill (see paragraphs [16]-[27] of his Honour’s judgment).
In Turner’s case his Honour Judge McGill referred to the different approaches in two other cases. One is the New South Wales decision of Retemu Pty Ltd v Ryan (NSWDC), Coorey DCJ 4300/08 and 4301/08, 16 April 2010 (unreported) which his Honour followed and one is the Victorian decision Dromana Estates Limited v Wilmoth Field Warne (2010) VSC 2008.
In Retemu Pty Ltd Coorey DCJ held it would be dysfunctional to the relationship between the solicitor and the client if the client had to make an application for a costs assessment on every occasion where there was an issue in relation to a claim in an interim bill. His Honour held that a provision similar to s 333 of the LPA allows all the interim bills to be assessed when the final bill is assessed.
In Turner’s case his Honour Judge McGill said that there was considerable force in the practical observation of Coorey DCJ that the position of a client in relation to the continuing performance of legal services under a retainer may well be prejudiced if there is a dispute in relation to an interim bill. His Honour said in consumer protection legislation such as this, rights to seek assessment ought not to be interpreted in a way which will restrict the protection available to a consumer if two views are fairly open. His Honour states that this principle favours the interpretation in New South Wales because it looks at the practical consideration of periodical assessment of the costs: it is likely to disrupt the continuing lawyer-client relationship.
In Dromana Estate Limited Associate Justice Wood adopted a more restrictive approach. At para 24 he said:-
“Sub-paragraph 3.4.37(2) enables an interim bill to be reviewed at the time it is delivered and also at the time the final bill is reviewed, even if the interim bill has been paid or if it has been previously reviewed. This is all subject, however, to the application to review both the interim bill and the final bill being filed within 12 months of the bills being received. (my underlining)
As did His Honour Judge McGill I prefer the reasoning of Coorey DCJ in Retemu Pty Ltd.
In my opinion, all the bills preceding the final bills were interim bills. In my opinion the effect of s 333 of the LPA is that as a ‘final’ bill has been delivered by the respondent to the applicant all the interim bills can be assessed including those bills delivered more than 12 months before the application was filed.
Recently, Applegarth J of the Supreme Court of Queensland applied Turner in Tabtill No 2 Pty Ltd v DLA Phillips Fox (a firm):[40]
Both parties cited the decision of McGill DCJ in Turner v Mitchells Solicitors. As in this matter, the Court was concerned with an application for assessment of legal costs under s 335 of the Act in relation to numerous tax invoices that were issued over a period of years. McGill DCJ considered an issue of interpretation arising in connection with ss 333 and 335. As to s 333(2), his Honour concluded that if there is an interim bill, then the legal costs which it covers may be assessed at the time of the interim bill or at the time of the final bill. Accordingly, the client may apply under s 335 for an assessment at either time, and will be subject to the applicable limitation at either time. If an application is made within 12 months of the final bill, the legal costs which may be assessed under s 335(1) include (or at least may include) all of the legal costs subject to any interim bill which was part only of the legal services the legal practice was retained to provide, even though those costs are not included in the “final bill”.
[40][2012] QSC 115 [66] (footnote omitted).
No reference appears to have been made in that case to the contrary decision of Dromana Estate in this court.[41]
[41]In Viscariello v Oakley Thompson & Co Pty Ltd [2012] VSC 351 [22], Ferguson J noted the conflicting authorities, but it was not necessary to consider which of the authorities was to be preferred. Likewise, Whelan J in Mustafa v Velos [2012] VSC 133 did not hear argument as to the correctness of Dromana Estates.
In an article entitled “Interim bills and time limits for costs assessment”, Ms Nicole Armitage of DG Thompson Costs Consultants & Lawyers commented as to the conflicting cases of Retemu and Dromana Estates:[42]
[42]Nicole Armitage, ‘Interim bills and time limits for costs assessment’ (2010) 217 Ethos 6, 7.
These two cases come to different conclusions about the interpretation of the Legal Profession Act’s sections dealing with time limit and interim bills.
We are of the view that the section dealing with interim bills does exactly what it states, that is, it allows clients to apply for assessment from 12 months of the final bill which includes assessment of all the interim bills in a matter.
In NSW Costs Assessors allow assessment of all interim bills in a matter as long as the Application has been filed within 12 months of the final bill however the questions remain open in Victoria.
The position has now been reached where courts in New South Wales and Queensland are routinely interpreting the equivalent provisions to s 3.4.37 and s 3.4.38 of the Act in a different manner to that considered correct in Dromana Estate.
Interpretation of the relevant provisions of the Act
The main arguments supporting the interpretation preferred in Dromana Estate may be summarised:
(a)the use of the word “bill” in s 3.4.38 without differentiation between interim bills and final bills means that the time limit for review of either must be 12 months;
(b)this is consistent with the obligation of a legal practice under s 3.4.35 to include in the bill or in an accompanying written statement advising of the avenues open to the client in the event of a dispute in relation to legal costs including under s 3.4.35(1)(b) the time limits that apply to the taking of an action under s 3.4.35(1)(a);
(c)the absence of any time limit for review of an interim bill provided the review of the final bill is sought within 12 months. This is significantly longer than the previous period of 60 days. The costs review of interim bills going back a number of years should not be permitted;
(d)as a significant proportion of the Act is in the nature of consumer protection legislation, the Act could be expected to clearly advise the client of all rights arising under the Act;
(e)section 3.4.37 should be given a subordinate interpretation to s 3.4.37 with the result that s 3.4.37 is given limited application;
(f)as s 3.4.37 is a “non-core” provision in the national scheme, it should not be interpreted in such a way as to undermine a core provision that is intended to achieve national consistency in the balance of interests of clients and solicitors. In other words, the tail (a non-core provision) should not wag the dog (the core cornerstone review provision);
(g)a client (who is not a sophisticated client or a third party payer who would be a sophisticated client if the third party payer were a client of the law practice concerned) has the ability to apply for an extension of time under s 3.4.38(6). This makes sense of the exclusion of sophisticated clients (and third party payers who would be sophisticated clients if they were the client of the law practice) who do not have the right to seek an extension;
(h)Form B3 produced by the Legal Services Commissioner under reg 3.4.4 of the Legal Profession Regulations2005 (Vic) makes no reference to any unrestricted right to tax old interim bills irrespective of when they were delivered at the time of taxation of the final bill. Likewise, Form B4 produced by the Legal Services Commissioner under reg 3.4.5 makes no reference to any unrestricted right to review old interim bills at the review of the final bill irrespective of when they were delivered;
(i)the adoption of an interpretation whereby interim bills can be assessed at the same time as a final bill creates a problem in so far as it may affect a solicitor’s liability for counsel’s fees, now long past challenge, and charged to a client under an interim bill now long past review; and
(j)the definition of “legal costs” in s 1.2.1 excludes interest. An application under s 3.4.38(5) does not affect interest which may already have become payable under an interim bill on an overdue account (s 3.4.21). If that interim bill can be reviewed several years later, any order on that review cannot be in respect of the interest accrued.
Purposes of Part 3.4 of the Act and effect of construction
Part 3.4 of the Act has express purposes. They are found in s 3.4.1[43] and include “to provide for law practices to make disclosures to clients regarding legal costs”, “to regulate the making of costs agreements in respect of legal services …”, and “to provide a mechanism for the review of legal costs and the setting aside of certain costs agreements.” In the event that applications for cost review of all bills were required to be made within 12 months, the effect would be that clients might lose the opportunity to review interim bills at the time of the final bill apparently afforded under s 3.4.37(2). This would almost always occur in the case of complex or protracted litigation where a period of more than 12 months would commonly elapse between the giving of one or more interim bills and the final bill. This would deprive s 3.4.37 of much of its intended effect.
[43]Set out at [29] above.
Moreover, s 3.4.37(2) is expressed to apply “whether or not the interim bill has previously been reviewed or paid”. In the event that a construction preferring s 3.4.38 to s 3.4.37 were adopted, these words too would lose much of their force. Clearly, there would be situations where the client would lose the effective benefit of s 3.4.37(2) and would not be able to review an interim bill at the time of the final bill because the 12 months period would have expired under s 3.4.38(5).
General and specific provisions
The maxim generalia specialibus non derogant (where there is a conflict between general and specific provisions, the specific provision prevails) is applicable.[44]
[44]D C Pearce and R S Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7th ed, 2011) [4.38], citing Perpetual Executors and Trustees Assoc of Australia Ltd v FCT (1948) 77 CLR 1, 29.
In Anthony Hordern and Sons Ltd v The Amalgamated Clothing and Allied Trades Union of Australia, Gavan Duffy CJ and Dixon J (as he then was) said:[45]
When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument' which might otherwise have been relied upon for the same power.
[45](1932) 47 CLR 1, 7.
Sections 3.4.38(5) and 3.4.39(3) provide for the time in which costs review may be had of bills in general. Section 3.4.37(2) provides for the time in which costs review may be had of a type of bill, namely the interim bill.
Section 3.4.37(2) is applicable both to applications under s 3.4.38 and s 3.4.39. In both cases, it would permit interim bills to be reviewed either individually or at the final bill stage. The applicable time limits are 12 months in the case of s 3.4.38 and 60 days in the case of s 3.4.39.
All words should be given meaning and effect
The construction contended for gives work to all the words in s 3.4.37(2) in accordance with the principle of statutory construction that all words should be given meaning and effect.[46] If s 3.4.37(2) were subordinated to s 3.4.38(5), the words ‘whether or not the interim bill has previously been reviewed or paid’ would be largely deprived of meaning and operation. This suggests that such a construction should not be adopted.
[46]Pearce and Geddes, above n 44, [2.26]; Turner v Mitchells Solicitors and Business Advisers Qld [2011] QDC 61 [18].
Consumer Protection Legislation
Section 3.4.37(2) and s 3.4.38(5) are ambiguous if not in large measure mutually contradictory. Section 3.4.37(2) says that interim bills may be reviewed at the same time as final bills. Section 3.4.38(5) says that only bills given within a year of the application for costs review may be made.
Part 3.4 and s 3.4.37[47] are examples of consumer protection legislation,[48] an established class of beneficial legislation,[49] ambiguities in which are to be construed liberally in favour of the person to be benefited.[50] The construction contended for by the plaintiff is beneficial to the client or third party payer because it affords a greater opportunity to bring an application for taxation, and allows them to do so after the conclusion of the retainer.
[47]It is appropriate to consider parts of Acts in order to determine whether they are beneficial: Pearce and Geddes, above n 44, [9.3]; Nilant v Macchia (2000) 104 FCR 238, 247 (Weinberg J).
[48]Dromana Estate [18]; Turner v Mitchells Solicitorsand Business Advisers Qld [2011] QDC 61 [21].
[49]Pearce and Geddes, above n 44, [9.3], citing Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470, 503-4; Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15, 41; Qantas Airways Ltd v Aravco Ltd (1996) 185 CLR 43, 60; Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451, 456.
[50]Pearce and Geddes, above n 44, [9.2], citing Bull v Attorney-General (NSW) (1913) 17 CLR 370, 384; IW Applicant v The City of Perth (1997) 191 CLR 1, 11.
Such a construction would also avoid prejudice to the conduct of the matter and the difficulty of a costs review during the conduct of the retainer. In the case of litigation, a costs review in midstream might adversely affect the conduct and course of the whole litigation.
Jurisdiction of the Costs Court
The determination of the construction issue affects the jurisdiction of the Costs Court to conduct costs reviews of interim bills.
This invokes the principle stated by Gaudron J in Knight v FP Special Assets Ltd,[51] applied by the High Court in Mansfield v Director of Public Prosecutions (WA),[52] and by Cavanough J in Michelotti v Roads Corporation,[53] where Gaudron J in Knight said:
It is contrary to long-established principle and wholly inappropriate that the grant of power to a court (including the conferral of jurisdiction) should be construed as subject to a limitation not appearing in the words of that grant. Save for a qualification which I shall later mention, a grant of power should be construed in accordance with ordinary principles and, thus, the words used should be given their full meaning unless there is something to indicate to the contrary. Powers conferred on a court are powers which must be exercised judicially and in accordance with legal principle. This consideration leads to the qualification to which I earlier referred. The necessity for the power to be exercised judicially tends in favour of the most liberal construction, for it denies the validity of considerations which might limit a grant of power to some different body, including, for example, that the power might be exercised arbitrarily or capriciously or to work oppression or abuse.
[51](1992) 174 CLR 178, 205.
[52](2006) 226 CLR 486, 492.
[53](2009) 26 VR 609, 614 [24].
Application of this principle again favours a full or liberal construction of s 3.4.37(2) and s 3.4.38(5) so that interim bills can be reviewed (whether or not for the first time) if the application for costs review of the final bill is made within time.
Circumstances known only at the time of the final bill
The Act provides for significant consequences in the event of a failure to comply with costs disclosure requirements. The effect of a failure to comply:
(a)may only be able to be ascertained once the total legal costs of the matter are known, that is, after the final bill (e.g. default in the obligation to estimate in good faith total legal costs of the matter);
(b)may only be identifiable after the end of litigation (e.g. default in the obligation to give a reasonable estimate at settlement of the amount the client will retain or a failure to estimate the fees likely to be payable to the other side if the client loses); and
(c)may only be known shortly before or at the end of a litigious matter (e.g. the settlement disclosures).
Many matters in courts continue for more than 12 months. Many final bills are given more than a year after one or more interim bills. It is hard to conceive that Parliament intended that clients would lose the opportunity to review interim bills with final bills merely because the matter extended over 12 months.
Whilst it is true that an application could be made to a Judge of the Supreme Court under s 3.4.38(6), it is unlikely that Parliament intended that this should be necessary every time a client sought to review one or more interim bills in a matter that extended over a lengthy period.
At the time when s 3.4.37(2) was enacted, the time limit for applications for costs review by clients and law practices was 60 days. It would be surprising if Parliament had intended to give a right of review to clients and law practices at the time of the final bill but only where the application for costs review of the final bill was made within the 60 day period from the time of the interim bill. The same position exists in relation to cost reviews under s 3.4.39 where the 60 day limit still remains.
A further concern is the undesirability of requiring clients to initiate a costs review on every occasion where there is an issue in relation to a claim on an interim bill. Not only might the continuing performance of legal services under a retainer be prejudiced if there is a dispute in relation to an interim bill, but it is likely to be convenient both to the client and to the law practice in the case of litigation if all disputes can be determined at the conclusion. At this time the outcome of the proceedings is known, the total cost of the proceedings is known, and the total amount of moneys that have been paid is known. It is at this time the Costs Court has jurisdiction to scrutinise the whole of the work that has been done and the total amount that has been claimed.
I now respond to the main arguments supporting the Dromana Estate interpretation:[54]
[54]See [81] above.
(a)It may be accepted that the word “bill” as used in s 3.4.38 means “interim bill” or “final bill”. However, there is no difficulty with a construction that permits interim bills to be reviewed with the final bill provided that the review of the final bill is within time under s 3.4.38(5) or following a determination by a Judge of the Supreme Court under s 3.4.38(6) that it is just and fair for the application for review to be dealt with after the 12 month period. Such a construction would permit all costs issues to be dealt with at the time of the costs review of the final bill when the outcome and cost of the litigation was known and the total amount of money that had been paid by the client under interim bills was also known.
(b)A legal practice has an obligation under s 3.4.35 to include in the bill or accompanying written statement advice as to the avenues that are open to the client in the event of a dispute as to legal costs, and any time limits that apply to the taking of any action under s 3.4.35(1)(a). There is no difficulty in complying with this obligation including a summary of the client’s rights and the general effect of s 3.4.37(1) and (2) in the case of interim bills.
(c)It is not correct to say that there is no time limit for reviewing an interim bill. An interim bill can only be reviewed in accordance with the time limit set out in s 3.4.38(5) or at the time of the final bill provided again that the final bill is reviewed in accordance with the time limit set out in s 3.4.38(5). In addition, a Judge of the Supreme Court may determine under s 3.4.38(6) that it is just and fair for the application for review to be dealt with after the 12 month period. Whilst the costs review may go back over a number of years, this will reflect the fact that the retainer and the performance of services has continued over that period. It is at the time of the costs review of the final bill that all of the circumstances relevant to the final determination of costs are known to all concerned.
(d)As much of the Act is consumer protection legislation, it is appropriate in accordance with ordinary rules of construction that it be given a liberal interpretation so that the purpose of beneficial legislation is achieved.
(e)Both s 3.4.37 and s 3.4.38 can be read together. A construction whereby interim bills can be reviewed at the time of the final bill and the final bill is required to be reviewed in time under s 3.4.38(5) gives each provision reasonable scope and application.
(f)Whilst s 3.4.37 may have been a “non-core” provision in the national scheme, other States and Territories generally have such a provision or a provision to like effect. Section 3.4.38(5) should be read in a harmonious way with s 3.4.37(2). Section 3.4.38(5) is derived from the national provisions and it is desirable that it be given a similar meaning and application in the courts of all States and Territories.
(g)Sophisticated clients and third party payers who would have been sophisticated clients if the third party payer were a client of the law practice cannot seek an extension of time under s 3.4.38(6). As with other clients, they also were intended under s 3.4.37 to have the right to have interim bills reviewed under s 3.4.38(2) at the time of the final bill whether or not the interim bill had previously been reviewed or paid.
(h)Whilst intended to inform and assist, the content of the forms produced by the Legal Services Commissioner under the Legal Profession Regulations2005 (Vic) can have no bearing on the construction of the Act. The Act stands to be construed according to ordinary principles of statutory construction.
(i)The existence of a 60 day time limit for law practices in s 3.4.39, and the existence of a 12 months time limit for clients in s 3.4.38 may create a problem for law practices that find themselves out of time for the purposes of a costs review under s 3.4.39 whilst the client is within time for the purposes of s 3.4.38(5). However, this problem exists regardless of whether or not interim bills can be reviewed at the time of final bill or not. The time limit under s 3.4.38(5) was increased to 12 months by the 2007 Act whilst the same Act left the time limit for reviews under s 3.4.39 at 60 days. The concern that law practices have a level of exposure because of the different time limits is not germane to the issue of construction that stands to be resolved namely whether interim bills can be reviewed at the same time as final bills provided that the application for costs review of the final bill is made within the time required in s 3.4.38(5) or later in accordance with a determination of the Court under s 3.4.38(6).
(j)Whilst it is correct that the determination of legal costs in s 1.2.1 excludes interest, and interest is payable on unpaid legal costs if the costs are unpaid 30 days or more after the practice has given a bill for the costs,[55] the obligation to repay interest already paid by the client in relation to disallowed costs arises quite independently from the construction issue that I am asked to resolve.
[55]Section 3.4.21 of the Act.
I have come to the conclusion that the preferred construction is for s 3.4.37(2) and s 3.4.38(5) to be construed so that interim bills of costs can be reviewed provided that the application to review the final bill is made within the time permitted by s 3.4.38(5) or after that period if a Judge of the Supreme Court so determines under s 3.4.38(6). I have arrived at this conclusion after carefully considering and giving great weight to the reasons given in Dromana Estate by Wood AsJ who has very extensive experience in the law relating to and assessment of costs.
The interpretation that I prefer is consistent with the interpretation of the equivalent provisions in New South Wales and Queensland.
Extension of time
If I were of the view that the application for costs review made by the plaintiff was out of time, it would be necessary to consider under s 3.4.38(6) whether it is just and fair for the application for review to be dealt with after the 12 month period.
It is not contended by the defendant that the plaintiff is a sophisticated client.
The plaintiff’s case is that after a conversation with Mr Bulzami in August 2011, he decided to take action against the defendant. He instructed his present solicitors to issue a summons against the defendant in or about August 2011. The summons for costs review was filed on 13 September 2011.
I am required to have regard to the delay and the reasons for the delay. The delay has been explained, and in the absence of cross-examination I accept Mr Crupi’s account as contained in his affidavits.
The question whether it is just and fair requires a consideration of any prejudice that might be occasioned to the defendant if an extension were granted. There is no evidence of any prejudice resulting from delay and none was suggested in argument. There is no reason based on prejudice why it would not be just and fair for the application for review to be dealt with after the 12 month period.
It was contended by reference to Repco Corporation Ltd v Scardamaglia that delay means delay since the accrual of the cause of action,[56] or in the present circumstances delay of that period which has elapsed since the rendering of an account.[57]
[56][1996] 1 VR 7, 11 (Smith J).
[57]Harrison v Hocking [2000] WASC 188 [72].
However, the delay since the rendering of the bills is minimal. The application for costs review was initiated quickly after the plaintiff retained its current solicitors.
It is apparent that prior to getting legal advice from his current solicitors Mr Crupi had little, if any understanding of the provisions of the Act. It was only when he was informed by Mr Bulzoni that he had successfully sought and obtained review of the costs charged in another matter, that he was prompted to obtain legal advice resulting in the application for costs review.
Counsel for the plaintiff made submissions about the plaintiff’s prospects of success in the application for costs review. He sought to contend that there had not been compliance by the defendant with a number of the requirements of s 3.4.9, and that under s 3.4.17 and s 3.4.19 the defendant might be held to the scale of costs, or to the fair and reasonable value of the legal services provided.
These issues will stand to be examined in detail by the Costs Court when the costs review application comes on for hearing, and it is desirable that I say very little about them. I am however satisfied that there is a serious issue to be tried, and that the plaintiff has at least some prospects of success in the costs review in the Costs Court.
In all of the circumstances, if it were necessary I would find that having had regard to the delay and the reasons for the delay that it is just and fair for the application for review to be dealt with after the 12 month period.
Conclusion
The first question is to whether the Costs Court has jurisdiction to conduct a review of bills without an extension of time having regard to the fact that the final bill is dated 8 April 2010 and was submitted within the 12 months period required under s 3.4.38(5) of the Act and all of the other bills are agreed to be interim bills under s 3.4.37 of the Act. I answer this question “Yes”.
The second question only arises in the event that the interim bills are out of time for costs review under s 3.4.38(5). I am of the opinion that the interim costs bills are not out of time for costs review under s 3.4.38(5). However, had I been of the opinion that the interim costs bills were out of time, I would have held under s 3.4.38(6) after having regard to the delay, and the reasons for the delay that it is just and fair for the application for review to be dealt with after the 12 month period.
I will make orders in these terms.
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