Hadjiantonakis v Madgwicks
[2017] VSC 397
•13 June 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2017 00913
| DANIEL HADJIANTONAKIS & ORS | Applicants |
| v | |
| MADGWICKS (A FIRM) (ABN 82 199 611 971) | Respondent |
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| JUDGE: | DIGBY J |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 13 June 2017 |
| DATE OF JUDGMENT: | 13 June 2017 |
| CASE MAY BE CITED AS: | Hadjiantonakis v Madgwicks |
| MEDIUM NEUTRAL CITATION: | [2017] VSC 397 |
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COSTS – Application for leave to make an application for review of solicitor’s costs out of time – Legal Profession Act 2004, s 3.4.38(6) – Reasons for delay – Whether it is fair and just for the application for review to be dealt with after 12 month period – Cost disclosure obligations – Legal Profession Act 2004, ss 3.4.19 and 3.4.16.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr S Freire | Stenta Legal |
| For the Respondent | Mr P Lovell | Madgwicks |
HIS HONOUR:
The applicants apply for a determination pursuant to s 3.4.38(6) of the Legal Profession Act 2004 (Vic) (the Act) that their application for review of solicitor's costs filed in the Costs Court of this Court on 16 March 2017, made by summons for taxation of costs, be dealt with after the period fixed by s 3.4.38(5) of the Act for review.
To put it another way, this is an application for an extension of time in respect of the operation of s 3.4.38(5) of the Act in respect of a cost review sought by the applicants.
Section 3.4.38(6) of the Act, provides for an application for a costs review by a client of relevant legal costs, other than a sophisticated client, to be dealt with outside the 12 month statutory period.
In order to permit such a late application for a legal costs review, the court needs to be satisfied that it is just and fair in the circumstances for the application to be made, having regard to the relevant delay and the reasons for that delay.
The Act relevantly states:
3.4.38 Application by clients or third party payers for costs review
(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.
By order made on 8 May 2017, Associate Justice Wood of the Costs Court ordered that the applicants’ application for leave pursuant to section 3.4.38(6) of the Act to make their application for review of legal costs out of time be referred to the Practice Court of this Court for a hearing before a trial judge.
In this matter the submissions of both the applicants and the respondent accept that the proper exercise of my discretion under s 3.4.38(6) of the Act involves, in summary, the consideration of the following factors:
(a) That the costs review mechanism in the Act is directed to consumer protection.
Mr Lovell's submissions on behalf of the respondent accept that proposition.
Further, both parties accept that the purposes underlying the relevant consumer protection objectives have to do with the protection of a client against excessive charges by a legal practitioner and enabling the client to be satisfied that bills for legal services are not excessive and ensuring that there is no unfair advantage taken by the legal practitioner and also imposing time limits to prevent clients delaying costs reviews to avoid payment, and finally, to obviate frivolous cost related objections .
(b) The length of delay in connection with the application for an extension of time and the appropriate balance of the potential competing prejudices which may affect the client and the lawyers.
I accept Mr Freire's submission in relation to delay, namely that the period to be focused on is the period of delay after the period of 12 months fixed by s 3.4.38(5).
(c) The reasons for the relevant delay.
(d) Whether the client was aware of its rights to seek a costs review.
(e) Whether there is evidence that a bill of costs may be excessive or, put another way, there is some material before the court to establish, on the requisite level of proof, that there is some ultimate point to the review sought, if time is extended.
(f) Whether the client has paid the relevant bill without complaint or demur.
(g) Whether the practitioner's reasons for opposing the enlargement of the time sought are consistent with that practitioner acting honestly, ethically and with proper motives and not merely to prevent the taxation of the relevant bill taking place.
The considerations to which I have made reference are not immutable or exhaustive and in the case of each consideration it is a question of what is just and fair in the particular circumstances which present themselves.
To deal first with the last of the above considerations, in this application. There have been a number of submissions made by each party about inferences and findings that might be made in connection with the relevant legal practitioners.
However, I do not consider that there is any basis whatsoever upon which to conclude that the opposition by the respondent to the enlargement of time sought in this case has, or could be said to have, any basis which is in any way improper or which is in any way ethically reprehensible or solely directed to preventing the taxation of a bill taking place. In my view the respondent here is simply seeking to rely on the relevant time limit, as it is entitled to do to obviate the time, effort and cost involved in a legal costs review.
In my view the respondent’s entitlement to oppose the application for additional time within which to review is not one which needs further evidence or explanation, there being no evidence from which to infer any inappropriate motive for that stance.
The chronology of the extensive events relevant to this application have conveniently been set out both in general terms in the applicants’ written submissions of 8 June 2017 and, also in a very specific way, in the applicants’ Chronology, attached to those submissions.
I set out that chronology, supplemented with a number of the exhibits referred to me by Mr Lovell during the course of argument where those exhibits were not already referred to in the applicants’ Chronology:
Date Event Reference 13 May 2015 The respondent agrees to provide legal services to Mr Hadjiantonakis in relation to the disposal of units in the Innovateq Unit Trust.
The work was divided into two stages:
· Stage 1: reviewing the Principals' Agreement and Innovateq Trust Deed; providing an initial advice; and preparing a letter of offer
Estimate of legal fees and other charges: $2,500.
· Stage 2: providing further advice; negotiating on Mr Hadjiantonakis's behalf; preparing other letters or legal documentation; providing such other assistance as may be necessary
Estimate of legal fees and other charges: 'We cannot give you an estimate of our fees for this stage until we know the outcome of the proposed initial letter of offer to Mr Barnes. We will give you an estimate for this further work at the relevant time'.
Mr Hadjiantonakis informs Ms Kovacs via email that he is happy to proceed on the above terms.
Hadjiantonakis, [4]; ex. "DH-1"
Kovacs, [4]; ex. “NJK-2”
27 May 2015 Ms Kovacs of the respondent informs Mr Hadjiantonakis that: fees incurred to that point were $1,940; after a legal advice is prepared, the fees will be around $2,600 - $2,800; and it is difficult to predict what kind of legal advice or assistance may be needed. Ms Kovacs asks whether Mr Hadjiantonakis is happy to be simply charged on a time basis.
Mr Hadjiantonakis writes to Ms Kovacs saying in response, amongst other things, ‘Yes, happy to proceed and happy to pay fortnightly or monthly. Whichever suits’.
Kovacs, [5]; ex. "NJK-3"
Kovacs, [6]; ex. “NJK-4”
15 June 2015 The respondent issues tax invoice no. B42848 in the amount of $3,690.03. ex. "DH-2" 13 July 2015 Ms Kovacs informs Mr Hadjiantonakis that: fees charged since 27 May have been charged on a time basis; fees will be continued to be charged on a time basis until Mr Hadjiantonakis instructs otherwise; and the estimated fees for preparing a letter and advising will be $3,000+GST.
Mr Hadjiantonakis writes to Ms Kovacs in response saying, amongst other things, ‘Please proceed as below and happy to pay the fees’.
Kovacs, [8]; ex. "NJK-5"
Kovacs, [9]; ex. “NJK-6”
7 August 2015 The respondent issues tax invoice no. B44066 in the amount of $16,188.79 (professional fees: $16,137; expenses: $51.81). ex. "DH-2" 17 August 2015 Ms Kovacs writes to Mr Hadjiantonakis and says that: he has not required the respondent to provide him with an overall estimate of legal fees, nor for each separate piece of advice, not for each conference or letter. The firm has simply been charging legal fees on a time basis. Ms Kovacs asks whether Mr Hadjiantonakis is happy with this current arrangement or would like to try to give him estimates for each discrete task.
Mr Hadjiantonakis writes to Ms Kovacs in response saying, amongst other things, ‘Happy to continue as we are. It’s probably best to do so. Once a fortnight is good’.
Kovacs, [11]; ex. "NJK-7"
Kovacs, [12]; ex. “NJK-8”
8 September 2015 The respondent issues tax invoice no. B44695 in the amount of $14,748.22. ex. “DH-2” 10 September 2015 Mr Hadjiantonakis writes to Ms Kovacs:
‘Just received an invoice for another $14,748.22 for August. Is this correct or has there been a mistake? I am now at $35,000 and trying to understand this. These charges are a long way off what was anticipated for this and we are not close to finalisation.
After the last invoice and when we spoke regarding legal costs, I assumed a couple of thousand here and there after the last bill.
I cannot afford to continue at these rates and I need a clear indication of future costs as well.’
Kovacs, [14]; ex. “NJK-9” 14 September 2015 Ms Kovacs’ personal assistant sends Mr Hadjiantonakis itemised accounts for several lump sum bills, including August 2015, and a covering email explaining the structure of the itemised accounts. Kovacs, [15]; ex. “NJK-10” 23 September 2015 Mr Hadjiantonakis sends an email to Ms Kovacs’ personal assistant advising that he has received the itemised accounts and would pay the outstanding account of August 2015. Kovacs, [16]; ex. “NJK-11” 30 September 2015 Ms Kovacs informs Mr Hadjiantonakis that: considerable time had been spent on the matter on the previous Monday (worth $1899 + $1045); and she estimated it would take her 1-1.5 hours to prepare an email (and associated work), but that the exact time would depend on various factors.
Mr Hadjiantonakis writes to Ms Kovacs in response saying that he appreciates her concern and advice regarding Madgwicks’ fees, and states that is happy with the approach proposed by Ms Kovacs.
Kovacs, [17]; ex. “NJK-12”
Kovacs, [18]; ex. “NJK-13”
8 October 2015 The respondent issues tax invoice no. B45309 in the amount of $9,146.70 (professional fees: $9,142.77; expenses: $3.96). ex. “DH-2” 10 November 2015 The respondent issues tax invoice no. B46175 in the amount of $4,909.97 (professional fees: $4,906.02; expenses: $3.96). ex. “DH-2” 11 November 2015 Ms Kovacs informs Mr Hadjiantonakis that: a new file would be opened in relation to a mediation of the unitholder dispute; for matters not directly relevant to the dispute, time would continue to be recorded to the current file, ‘which has no set estimate because I cannot predict the amount of time required to be spent on this’.
Mr Hadjiantonakis writes to Ms Kovacs in response saying amongst other things, ‘I will keep it minimal as well until that time also outside mediation’.
Kovacs, [21]; ex. “NJK-14”
Kovacs, [22]; ex. “NJK-15”
18 November 2015 The respondent provides a costs agreement and disclosure statement to Mr Hadjiantonakis.
The disclosure statement states:
‘We will continue to provide you with advice and assistance on issues concerning your dispute with Mr Barnes as they arise. As you know, it is impossible to predict the scope of this work and so we will continue to charge our fees for this work on a time basis.’
Further, the scope of the matter had been expanded to cover the cost of a mediation to be held with Mr Barnes. The fees regarding the mediation were estimated to be $8,895 plus GST (total fees and disbursements inclusive of GST: $9,794.50)
Mr Hadjiantonakis, under cover of an email stating, amongst other things that ‘[a]ll is fine to me’, sends Madgwicks a signed acceptance of the revised fee estimate.
Kovacs, [23]; ex. “NJK-16”
Kovacs, [24]; ex. “NJK-17”
7 December 2015 The respondent issues tax invoice no. B46648 in the amount of $7,880.24 (professional fees: $7,707.79; expenses: $172.48). ex. “DH-2” 9 December 2015 Mr Hadjiantonakis by email advises that he will pay invoice no. B46648 in the amount of $7,880.24. Kovacs, [26]; ex. “NJK-18” 22 December 2015 The respondent issues tax invoice no. B47068 in the amount of $27,004.90 (professional fees: $23,296.13; expenses: $3,856.96). ex. “DH-2” 19 January 2016 The respondent issues tax invoice no. B47515 in the amount of $8,247.97 (professional fees: $7,925.07; expenses: $3322.86). ex. “DH-2” 25 May 2016 Johanna Jackson of the respondent writes to Mr Hadjiantonakis, with Ms Kovacs’ comments on issues raised regarding the estimates:
‘Given the constant urgency of this matter, the client did not expect us to provide revised estimates each time the scope changed (which was almost weekly’.
‘I had very frank conversations with the client at every point along the way. Sometimes those discussions were followed up by emails, sometimes I made file notes and sometimes I sought his email confirmation that he was ok with it’.
‘The client never once had issues with the way this was handled and I said to him several times throughout that if he wanted, we could provide him with bills more frequently than monthly to help him stay on top of the bills – he declined each time and said he was happy with how we were handling it’.
Kovacs, [30]; ex. “NJK-19” 30 May 2016 Mr Hadjiantonakis writes to Ms Jackson:
‘I understand that you are unable to charge me in excess of this estimate and re-estimate. I respectfully deny the assertions made by Naomi, outlined to me in an email dated 25 May 2016 from Johanna Jackson where Naomi apparently claimed that I did not expect to be provided with revised estimates. This correspondence only serves to confirm your firm’s failure to properly disclose costs to me.’
Kovacs, [31]; ex. “NJK-20” 3 August 2016 Mr Hadjiantonakis’ solicitors write to the respondent:
‘Our instructions are that your firm billed $91,816.82 in respect of the Unit Holder dispute matter, $89,316.82 in excess of the $2,500 estimate.’
ex. “LF-1” 28 September 2016 Mr Hadjiantonakis’ solicitors write to the respondent:
‘your firm failed to comply with the ongoing obligation to disclose a change to the estimates, as total legal costs substantially exceed the estimates’.
‘we are finalising instructions in respect of an application for assessment of costs’.
Faba, [6]; ex. “LF-3” 28 September 2016 The respondent notes that an application had been foreshadowed in the letter from Mr Hadjiantonakis’ solicitors dated 28 September 2016. Faba, ex. “LF-6”. 3 October 2016 Mr Hadjiantonakis files a counterclaim in debt recovery proceedings brought by the respondent in the Magistrates’ Court of Victoria.
The counterclaim alleges that by reason of the respondent’s failure to comply with its disclosure obligations under s 3.4.16 of the LPA, Mr Hadjiantonakis is entitled to apply for a review of the legal costs charged by the respondent: [8].
ex. “LF-5” 18 January 2017 The 12-month period in which an application can be made pursuant to s 3.4.38(5) of the LPA expires. 19 January 2017 The respondent files a summons for taxation of costs in the Costs Court relating to legal costs charges for the provision of legal services in connection with related Supreme Court proceedings.
Upon receiving the summons, Mr Hadjiantonakis’ solicitor, Mr Faba, realises that the 12-month deadline had been missed.
Hadjiantonakis, [14]; ex. “DH-5”
Faba, [15]
27 February 2017 Mr Hadjiantonakis’ solicitors seek the respondent’s consent to commence review proceedings out of time. Hadjiantonakis, [12]; ex. “DH-3” 8 March 2017 The respondent refuses to consent to orders for review proceedings being brought out of time. Hadjiantonakis, [13]; ex. “DH-4”
The general background to this matter is that Mr Hadjiantonakis is a former client of the respondent firm.[1] In May 2015 the first applicant and the respondent entered into an agreement whereby the respondent firm agreed to provide pre-litigation legal services concerning a dispute as to the disposal of certain units in what is referred to as the Innovateq Unit Trust (the Unit Trust).
[1]Affidavit of Naomi Jacqueline Kovacs affirmed 8 May 2017, at [4] affirms that the second and third named applicants did not enter into any costs agreements with Madgwicks, nor were they considered to be “clients”, and that Madgwicks did not send any invoices to them for legal costs.
The applicants submit that in purported compliance with s 3.4.9(1)(c) of the Act, the respondent law firm, by letter of 13 May 2015, disclosed to the first applicant that its estimate of legal fees and other charges was to be divided into two stages. The first stage involved the preparation of a letter of offer in relation to the disposal of certain units and associated advice. The estimate provided for legal fees and other charges and it estimated what was said by the respondent to be likely to be included within a fee of $2,500 for the first stage of the legal work.
The second stage of the envisioned legal work to be undertaken by the respondent law firm involved providing further advice, negotiations, preparing letters and providing other assistance. However, in relation to the second stage legal work the respondent stated in its letter of 13 May 2015 that it could not provide an estimate of its fees until the outcome of the proposed initial letter of offer was known. The respondent did state that it would provide an estimate of its further work at the relevant time.
The applicants submits that no estimate for the second stage of the legal work was provided by the respondent and that in fact the respondent provided the first applicant with estimates of fees for discrete items of work only, and also only on an ad hoc basis over the course of the engagement.
Those ad hoc estimates from the respondent were[2]–
[2]Applicants’ Submissions, 8 June 2017, [12].
(a) on 27 May 2015 – an estimate of $2,600-$2,800 for the ‘stage one’ work;[3]
[3]Affidavit of Naomi Jacqueline Kovacs affirmed 8 May 2017, [5]; Exhibit “NJK-3”.
(b) on 13 July 2015 – an estimate of $3000 + GST to prepare a letter;[4]
(c) on 30 September 2015 – an estimate of 1-1½ hours work to prepare an email and associated work;[5] and
(d) on 18 November 2015 – an estimate of $9,794.50 in respect of a mediation.[6]
[4]Ibid [8]; Exhibit “NJK-5”.
[5]Ibid [17]; Exhibit “NJK-12”.
[6]Ibid [23]; Exhibit “NJK-16”.
Except for these disclosures, the applicants submit that the balance of the second stage of the legal work was carried out by the respondent effectively on a time costing basis without any written estimate of fees, and that the total legal costs that the respondent charged the first applicant was $91,816.82, which the first applicant contends was substantially in excess of the estimates provided to him.
It is not contested as such that the ultimate total of legal costs charged by the respondent was in excess of the specific estimates which were provided by the respondent to the applicants from time to time.
What is notable, however, is that the applicants without demur ultimately paid all the above legal fees.
In about November 2015, the Unit Trust project had evolved to another stage which the parties have called the litigation phase.
By costs agreements between the first applicant and the respondent of 23 December 2015 and 17 January 2016, the respondent agreed to provide legal services to the first applicant in relation to proceedings in this court brought by entities associated with the first applicant.
In August 2016, the respondent commenced proceedings against the first applicant in the Magistrates’ Court of Victoria to recover what was alleged to be outstanding fees in relation to the litigation phase of the project.
At the same time the first applicant pleaded his defence of 3 October 2016 in the Magistrates’ Court, he also pleaded a counterclaim in the proceeding which alleged that the respondent had failed to comply with its disclosure obligations under s 3.4.16 of the Act and that the first applicant was entitled to a review of the legal costs charged by the respondent in respect of the pre-litigation phase.
In about September 2016 there was also a written communication by the first applicant to the same effect, notifying an intent to seek a review of some description of the pre-litigation phase legal costs. This is the potential review of costs which is the subject of this application. That communication from the first applicant’s lawyers was dated 28 September 2016.[7]
[7]Affidavit of Luke Faba sworn 14 March 2017, Exhibit “LF-3”.
On 28 September 2016, the respondent noted that an application had been foreshadowed by the same letter to which I have referred.[8]
[8]Ibid, Exhibit “LF-6”.
The matter of the claims and counterclaims in the Magistrates’ Court was then addressed in consent orders on 20 October 2016 by which the parties agreed to stay the proceeding until the legal costs the subject of that proceeding had been assessed and any costs dispute in relation to the matters which were alive in the Magistrates’ Court proceeding had been addressed in the Costs Court of this Court.
As it transpired, the 12 month period within which the first applicant could have applied, as of right, under s 3.4.38(5) of the Act for a review of the legal costs in respect of the pre-litigation phase of the matter, expired on 18 January 2017.
The day after that expiration, on 19 January 2017, the respondent filed a summons for taxation in the Costs Court relating to legal costs charged in respect of the litigation phase.
Certain assertions were made in the applicants’ written submissions of 8 June 2017, in particular in paragraphs 22 and 23, about the circumstances referred to in the last three preceding paragraphs.
The applicants’ submissions at paragraph 24 include a submission that upon receiving the respondent’s summons, the first applicant’s solicitor, Mr Faba, realised that the 12 month deadline of 18 January 2017 under s 3.4.38(5) of the Act, had been missed.
On 27 February 2017, the first applicant's solicitor sought the respondent's consent to commence an application for costs and a review of those costs out of time. However, by a communication of 8 March 2017[9] the respondent refused to consent.
[9]Affidavit of Daniel Hadjiantonakis sworn 14 March 2017, Exhibit “DH-4”.
Considerations
In this matter, the applicants place some significant reliance upon the provisions of the Act which require lawyers to provide, pursuant to ss 3.4.9 and 3.4.16, the basis upon which their legal costs will be calculated, the client’s rights in relation to certain costs matters including an estimate as to total legal costs, or if that is not practicable a range of estimated total legal costs and an explanation as to major legal cost variables, and an ongoing obligation to disclose relevant legal cost changes.
The applicants also submit that in this case the period of delay that is relevant in the current proceedings is only a relatively short period of delay beyond 18 January 2017. The applicants emphasise that the last day for an application under s 3.4.38(5) was 18 January 2017 and that a summons for taxation was filed on 16 March 2017, a delay period, the applicants points out, of 57 days. The applicants also submit that it should be borne in mind that the respondent’s consent to commencing an application for a costs review was sought on 27 February 2017, some 40 days after the last day for an application under s 3.4.38(5) of the Act. The relevant delay, the applicants submit, is here relatively minor compared with the period of delay in many cases.
In my view, the length of delay is not a matter which weighs heavily against the applicants’ application. I accept the applicants’ submission that time runs from the end of the statutory period available for the relevant application and that the applicants’ submission that the applicants’ request for an agreed extension made very soon after the expiration of the statutory application period also lessens the significance of the actual period of delay. I add that I did not understand the respondent’s submission to be that the applicants’ delay was to be weighed heavily in the balance against the applicants’ application. It was not submitted by the respondent that delay itself is a disentitling factor in the circumstances.
The explanation for the delay as put forward by the applicants, is simply that the first applicant’s solicitor “blundered” in that he had not borne in mind the approaching expiration of the period of time within which an application needed to be made under the Act and was therefore not alive to that deadline until the first applicant received the respondent’s summons of 19 January 2017. The applicants submit however that their delay was not intentional.
In relation to the explanation for delay, I note however that the applicants’ explanation for delay is hardly a satisfactory one. In some circumstances there may be something that has occurred which creates a distraction or a misunderstanding or a misperception; there may even be circumstances caused and representations made by relevant parties, including the respondent to such an application, which could fully explain the reason for delay. Here however there is only a simple error on the part of the applicants’ solicitors and in my view that circumstance weighs, together with other factors which I shall come to, in the negative in relation to the application, although not as heavily as other factors, to which I shall also come.
The applicants also submit that there is evidence of overcharging which justifies the need for the review of the relevant eight legal bills the subject of this application. The applicants rely, in this respect, on the affidavits of Elizabeth Mary Harris sworn 5 May 2017 and 7 June 2017, together with an affidavit of the first applicant sworn 14 March 2017, and the affidavit of Luke Faba sworn 14 March 2017. The respondent has filed affidavits of Naomi Jacqueline Kovacs affirmed 8 May 2017, and of Peter Kennedy sworn 30 May 2017.
The Harris affidavits, the applicants submits, depose to that cost expert’s opinion that there are a number of aspects of the respondent’s invoices which, if the requested review proceeds, are likely to result in a reduction of the respondent's legal costs. Those assertions are set out in paragraph 42(a) to (e) of the first applicant's written submissions.
In my view however, this potentially relevant aspect of the evidence is to be weighed only very lightly in favour of the application, if at all, because as pointed out by the respondent in argument, the preliminary evaluation of what might be instances of overcharging referred to by Ms Harris are very limited in number by reference to the examples that Ms Harris has sought to identify. Furthermore, the respondent points out that Ms Harris has not had access to the file of the relevant law firm, which would be necessary to undertake a meaningful and persuasive evaluation of any overcharging, or other inappropriate forms of charging by the respondent law firm. Finally, in her own affidavit, Ms Harris refers to examples which only “may” result in overcharging or which could give rise to a certain view being taken by the taxing officer of the court.
In my view, in the overall, the affidavit material put on by Ms Harris does not establish that there is likely to be substantial, or indeed any, overcharging by the respondent.
The applicants also submit that there is an absence of prejudice to the respondent in the circumstances of this application and submits in that regard that the respondent does not identify any real prejudice, were the application for extension of time to be granted.
The respondent in its submissions emphasises that the establishment of inadequate cost disclosure by the respondent has occurred in circumstances where in many cost communications between the respondent and the first applicant the respondent has also notified the applicants, in a substantially accurate and compliant way, of their rights under the Act and in relation to the obligations of the respondent as their lawyer in connection with the submission of legal costs.
The respondent also submits that the affidavit material of Ms Harris is not, and should not, be taken as persuasive of any excessive charging in the legal bills that have been produced by the respondent in this matter.
The respondent, in its submissions, emphasises that the first applicant’s solicitor accepts blame in relation to delay in making any application to review costs until the expiration of the statutory date for an application to review, and the respondent also emphasises in its submissions that this is a matter to be weighed in the balance against the applicants. In essence the respondent submits that the applicant here failed to provide any proper reason for delay.
The respondent also emphasises that on numerous occasions it communicated to its client, the first applicant, that it was endeavouring to bill the client in a way which best foreshadowed future legal costs but that in the circumstances which existed from time to time during the course of the provision of legal services to the first applicant it was not possible to provide any better estimate of legal costs. Clear examples of communications of this nature are to be found in exhibits “NJK-3”, “NJK-5”, “NJK-7”, “NJK-12”, “NJK-14” and “NJK-16” to the affidavit of Ms Kovacs affirmed 8 May 2017.
The respondent was also, in the correspondence referred to in the last preceding paragraph, and in particular for example in the correspondence exhibited at “NJK-3”, “NJK-14” and “NJK-19” making it clear, for reasons which they explained expressly to their client, that they could not, in the circumstances, predict the extent of future costs any better than they were doing.
The applicants submit that nevertheless the respondent has failed to comply with the letter of ss 3.4.9 and 3.4.16 of the Act in respect of estimates of total legal costs, or if that was not practicable, as to a range of likely costs.
I consider, however, that the correspondence reflects the substantial position between the parties, namely that Ms Kovacs of the respondent, in the circumstances sufficiently advised her client as to the difficulty she and her firm were confronted with as the first applicant’s lawyer in relation to providing any meaningful forward estimate of costs. Furthermore, the evidence establishes that when requested, Ms Kovacs, on behalf of the respondent provided details of actual costs incurred of the type referred to above, for example in Exhibit “NJK-10”.
In my view the respondent also in the circumstances of what was clearly the very fluid and unpredictable file it was handling, sufficiently foreshadowed its approach to costs estimation and the estimated costs in practical terms as best it could.
Further, in my view, the applicant client again and again communicated his acceptance of the approach which the respondent said it was proposing to take to the estimation of costs in the respects that I have outlined, and the first applicant also agreed, in express terms from time to time, to that approach.
Furthermore, the first applicant paid all the relevant legal accounts without demur. The only qualification to this position was in mid-September 2015, in Exhibit “NJK-9” to the affidavit of Ms Kovacs affirmed 8 May 2017, where there was a mild general complaint made by the first applicant, soon thereafter accepted, in substance, by him as remediated, on a fair reading of the following communications.
It was not until 31 May 2016, in Exhibit “NJK-20” to Ms Kovacs’ said affidavit, that the first applicant complained of a failure on the part of his lawyers to disclose in accordance with the Act.
In this application the applicants have conceded that the attitude of the first applicant in the specific respects I have specified, may be taken into account in the exercise of my discretion under the Act, although the applicants submit that the first applicant's conduct in this regard should not be regarded as dispositive.
The respondent submits that I should weigh these matters heavily against the applicants' application.
In my view, the first applicants acceptance of the way in which his lawyers were dealing with costs, including the estimation, the forward estimation of costs, the billing of those costs and matters in connection with costs, reflected in the correspondence between the parties examples of which I have referred to, should be weighed heavily against the applicants' application for an extension of time within which to review the subject legal bills.
The first applicant in substance received in excess of approximately 12 notifications of relevant rights under the Act from the respondent, and the applicants also received a series of legal bills, yet had no real contemporaneous quarrel with the respondent’s legal costs and paid them up to the end of May 2016.
In my view, such acceptance and agreement of the billing and estimating by the respondent more than neutralises the respondent’s technical breaches such as may have arisen under ss 3.4.9 and 3.4.16 of the Act.
As to prejudice, the respondent’s prejudice is submitted to be the prejudice associated with it being placed in a position, were an extension of time to be granted, where it would be, or would be likely to be, forced to provide extensive itemised billings in respect of the eight legal accounts in issue and further it would be exposed to the costs of the review process generally.
The respondent also identifies the prejudice which it may suffer if ultimately ordered to refund legal fees received which have, in all likelihood, been disbursed some considerable time ago, and which were received in circumstances where the first applicant had willingly paid such fees without any suggestion of demur.
The respondent also identifies inconvenience which would arise were it required to participate in a review of its extensive legal bills to date in relation to the first stage of the Unit Trust dispute.
Finally, the respondent submits that it would be unjust in light of the applicants’ conduct in relation to the past legal bills if it were now to suffer an extensive review of those costs and possible order for reimbursement to the applicants.
The first applicant’s prejudice is principally his loss of opportunity to review the subject legal costs which may be reduced and ordered to be repaid on review.
The applicants also argue that if leave is not granted they will be disadvantaged because only the respondent will be able to conduct a positive costs review case and the applicants will be handicapped by being unable to challenge the respondent’s costs in relation to the pre-litigation stage of legal advice.
I recognise that the first applicant’s identification of some possible prejudice in this respect is cogent. However in my view that potential prejudice is negated by two particular factors. Those factors are the paucity of evidence in relation to there being any actual overcharging by the respondent, and more significantly, the circumstances which I have highlighted in relation to the conduct of the first applicant in accepting the way in which the respondent proposed to bill and estimate and undertake its future billing and estimating from time to time, coupled with the first applicant paying the respondent each of the relevant legal bills without demur. In my view the loss of opportunity to review the respondent’s legal bills, and possibly reduce those bills, is more than displaced by the disentitling conduct referred to of the applicants in this matter.
In relation to the submissions that are made in paragraphs 22 and 23 of the applicants' written submissions of 8 June 2017 which assert that the issue of the respondent’s summons of 19 January 2017 was not “coincidental” and that the respondent waited deliberately until the expiration of the time for the first applicant to challenge his legal costs before the respondent launched its own summons for taxation of related legal costs, I note specifically that I am not persuaded as to any of these assertions and submissions by the applicants. I am not persuaded that the respondent's issue of a summons for taxation of costs on 19 January 2017, the day after the effluxion of the period of time within which the applicants could apply to review its relevant legal costs, was anything other than a mere coincidence. There is no evidence to the contrary and I am unpersuaded that the submission made in paragraph 22 of the applicants’ written submissions has any foundation or provides me with any proper basis upon which to draw the conclusion, by way of an inference, that the respondent’s timing in that regard was not coincidental. Nor am I persuaded that the respondent waited deliberately until the first applicant had exhausted his entitlement, as of right, to challenge the legal costs charged to him in respect of the pre-litigation phase, before springing on him the respondent’s own summons for taxation of costs relating to the litigation phase.
I also acknowledge in relation to these issues that Mr Freire, quite rightly conceded in his submissions that he accepted the evidence of Helen Francis McNamara[10] in relation to the issue referred to in paragraph 22 to which I earlier made reference.
[10]Affidavit of Helen Francis McNamara sworn 9 June 2017, in particular at [5]–[6].
Conclusion
For the reasons referred to above I will dismiss the applicants' application for an extension of time under the Act.
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