Hodges v Sathyanparamatheva

[2019] NSWLC 8

Local Court

New South Wales

Medium Neutral Citation:

Hodges v Sathyanparamatheva [2019] NSWLC 8

Hearing dates:

13 June and 12 August 2019

Date of orders:

14 October 2019

Decision date:

14 October 2019

Jurisdiction:

Civil

Before:

Huntsman LCM

Decision:

The proceedings subject of the Statement of Claim may not be commenced given the provisions of the Legal Profession Uniform Law (NSW).

Catchwords:

COSTS – Solicitor/ Client – Costs agreement – Bill of costs - Recovery of legal bill of costs issued by solicitor to client – Statutory requirements – Effect of non-compliance with statutory requirements

Legislation Cited:

Legal Profession Uniform Law 2014 (NSW) ss 3, 6, 169, 189, 192, 194

Legal Profession Uniform Regulations 2015 (NSW)

Legal Profession Uniform General Rules 2015 (NSW) r 73

Civil Procedure Act 2005 (NSW) s 63

Uniform Civil Procedure Rules 2005 (NSW) r 36.15

Cases Cited:

Frontier Law Group Pty Ltd v Barkman [2016] NSWSC 1542

Category:

Principal judgment

Parties:

Stephen Hodges (plaintiff)
Praveena Sathyanparamatheva (first defendant)
Sathyanparamatheva Paramanirupan (second defendant)

Representation:

Counsel:
Mr Flaherty for the defendants

Solicitors:
Mr Stephen Hodges for the plaintiff (in person and as solicitor)
Markhan Geikie Farrugia, for first defendant

File Number(s):

2018/00328407

Publication restriction:

Nil

Judgment

Background

1. The plaintiff, Stephen Hodges, filed a Statement of Claim seeking legal costs said to be owed to him by the first and second defendants, who were husband and wife. The particulars in the Statement of Claim included that on 7 June 2018 the defendants retained the plaintiff as their solicitor, and that the defendants agreed to pay costs to the plaintiff, as set out in a written cost agreement dated October 2017. The plaintiff states that the plaintiff undertook work for the defendants, as particularised in tax invoices dated 6 July 2018, 11 July 2018, 3 August 2018 and 17 August 2018. It is stated that those amounts remain outstanding and total $18,161. The total claim including filing and service fees is $18,688.28.

2. The background to the matter includes that the plaintiff was engaged by the first defendant in about October 2017, to act for the first and second defendant, in a dispute concerning a joint venture agreement. There had been, and was, litigation in the Supreme Court and a settlement deed in relation to the joint venture dispute to which the defendants were parties.

3. In or about October 2017, Hodges Legal (the evidence indicates that the plaintiff Stephen Hodges is a sole practitioner trading as Hodges Legal) agreed to act in those proceedings, and sent a costs agreement to the first and second defendants. The cost agreement had a defect, in that the named client in the cost agreement was the plaintiff in the joint venture agreement which was subject of the Supreme Court legal proceedings, rather than the first and second defendants. However the cost agreement set out terms of the retainer and the parties acted in furtherance of that agreement, in that the first defendant paid some monies into trust and the plaintiff commenced to act as the solicitor for the defendants in the Supreme Court proceedings.

4. There were issues between the parties as to unpaid legal costs, leading to the plaintiff filing a Notice of Ceasing to Act in the Supreme Court proceedings in February 2018. In July 2018 the plaintiff again acted for the defendants in the same Supreme Court proceedings. The legal costs subject of the Statement of Claim were said to have been incurred after the plaintiff resumed acting for the defendants. The earlier disputed legal fees (leading to the plaintiff ceasing to act) had been resolved by agreement between the parties.

Agreed facts

5. It is an agreed fact in the current proceedings that the first defendant paid $3000 into the trust account of Hodges Legal, by electronic transfer, on 17 October 2017. It is also an agreed fact that Hodges Legal commenced acting for the defendants.

6. On 28 February 2018 the plaintiff filed a Notice of Ceasing to Act for the defendants in the Supreme Court proceedings. The plaintiff again acted for the defendant in the Supreme Court proceedings in July/August 2018.

7. The plaintiff has sent to the defendants Bills of Costs/tax invoices for legal costs and disbursement in respect of acting for the defendants in July/August 2018. These remain unpaid.

History of proceedings

8. This matter was listed for hearing on 13 June 2019. The defendants had not filed any evidence in the proceedings, and did not appear in person on the hearing date. Counsel for the defendants, who was recently instructed, requested an adjournment and vacation of the hearing date. No Notice of Motion seeking those orders was filed; the application was made orally by Counsel at the commencement of the hearing. That application was refused – detailed extempore reasons were given on 13 June 2019 for the decision to refuse to vacate the hearing date. The detail provided in the extempore reasons will not be repeated in these written reasons for decision; reference may be had to the transcript of the proceedings of 13 June 2019. The hearing then commenced on 13 June 2019. The plaintiff gave affidavit evidence, and some additional oral testimony, and was also subject to cross examination. Counsel for the defendants remained in the proceedings and conducted the cross-examination and made submissions.

9. At the close of the plaintiff’s case Counsel for the defendant made a number of submissions in relation to the cost agreement between the parties which was in evidence, and the effect of the Legal Profession Uniform Law (NSW). Those submissions, whilst not specifically pleaded in the defence, went to the permissibility of the current legal proceedings and as such, although not specifically pleaded, were matters to which the court needed to have regard, as further detailed below.

10. In order to allow the plaintiff to consider the submissions, the hearing was adjourned with directions for the filing of written submissions. The matter was listed for decision only on 12 August 2019. On that date it was indicated to the parties that the written submissions had raised a new issue which needed to be addressed. In addition, the written submissions by the defendant had not been received by the presiding Magistrate, from the registry, prior to the hearing date of 12 August 2019, and there had not been an opportunity to properly address those submissions in the decision which had been prepared. The new issue raised in the written submissions filed on behalf of the defendant, related to a default judgement having been previously obtained by the plaintiff against the second defendant. No copy of the default judgement was on the court file, so it was not before the court on the hearing date of 13 June 2019, nor had either party referred to the existence of the order on that date. It was the case that the defendant also had no copy of any order for default judgement.

11. Given the submissions made by the defendant, I directed that a search of JusticeLink and/or online registry records be undertaken by court staff, in open court, in the presence of the parties. That search indicated that such an order, being a default judgement in favour of the plaintiff for the entire debt, against the second defendant, had been made on 22 December 2017. It was also clear that a Notice of Motion had been filed by the plaintiff seeking default judgement against both defendants in December 2017.

12. The plaintiff indicated to the court on 12 August 2019 that he had applied for a default judgement, but because a defence had been filed by the first defendant, he was under the impression that no default judgement had been ordered. The default judgement against the second defendant was for the whole amount sought in the Statement of Claim. Subsequently, in January 2019, the registrar of the General Division of the Local Court made directions progressing the matter for hearing, directing the filing and service of the evidence of the parties (which included the second defendant). The Statement of Claim continued to be treated as a claim against the two defendants, being the first and second defendant.

13. A further complication before the court on 12 August 2019 was that during the proceedings on 13 June 2019 the plaintiff conceded that he had no right of action against the second defendant as he had never met her, nor separately corresponded with her, nor provided a copy of the cost agreement to her. He conceded that there was only one defendant against whom he could proceed, being the first defendant (who was the husband of the second defendant). Therefore on 13 June 2019 on the first hearing date in this matter, the plaintiff sought to discontinue the proceedings against the second defendant and proceed only against the first defendant. This was consented to by the defendant and leave was granted. As previously indicated there was nothing on the court file to indicate that a default judgement against the second defendant had been obtained, nor was there any mention of it by any party at the hearing in June 2019. In view of the order for default judgement against the second defendant, it was the case that there were no current proceedings involving the second defendant before the court on 13 June 2019 as the default judgement had not been set aside.

14. After hearing from the parties on this issue, I made a determination. Pursuant to section 63 of the Civil Procedure Act 2005 I was of the view that consent to discontinuation against the second defendant was an order/direction based on irregularity, and in the circumstances it was appropriate that the order be revoked. Consent orders were filed on 12 August 2019, by which the parties consented to the default judgement against the second defendant being set aside; and further consented to the discontinuance dated 13 June 2009 being set aside. It is noted that pursuant to rule 36.15 of the Uniform Civil Procedure Rules (UCPR) the order for discontinuance and also the default judgement can be set aside by consent of the parties, and that this would apply to the current circumstances, and that I am also satisfied such order is appropriate pursuant to the provisions of section 63 of the Civil Procedure Act (for irregularity).

15. Given that the defendant’s submissions had not been before the presiding Magistrate prior to 12 August 2019, in order to properly consider the matters raised therein it was appropriate to adjourn the proceedings before decision. The proceedings were adjourned for decision on 14 October 2019.

16. Upon preparation of these Reasons for Decision, it became apparent that a further issue arose under the Legal Profession Uniform Law (NSW) which neither party had addressed in their written submissions, and on 13 August the parties were invited to respond to the issue. On that date an email was sent to the parties by Chief Magistrates Office which stated:

It is noted that submissions have been made in relation to the effect of the Legal Profession Uniform Law (NSW) in the current proceedings. The issues include whether s178 of the Uniform Law will have application.

The Presiding Magistrate has noted the provisions of s192 and s194 of the Uniform Law:

192 Notification of client’s rights

A law practice must ensure that a bill includes or is accompanied by a written statement setting out—

(a) the avenues that are open to the client in the event of a dispute in relation to legal costs; and

(b) any time limits that apply to the taking of any action referred to in paragraph (a).

194 Restriction on commencing proceedings to recover legal costs

A law practice must not commence legal proceedings to recover legal costs from a person unless a bill has been given for the legal costs and the bill complies with the requirements of this Law and the Uniform Rules.

The Presiding Magistrate has indicated that if either party wishes to make any submission about these provisions, that brief submissions be provided on or before 6 September 2019.

17. This is further discussed below. As at the date of the preparation of these written reasons for decision no further submission had been received from either party. On 14 October 2019 the parties confirmed there were no further submissions to be made.

Issue for determination

18. In this matter the affidavit evidence of the plaintiff is not contradicted. The defendants filed no evidence, and gave no evidence in the proceedings. Essentially the plaintiff relies on the tax invoices/Bills of Costs, and the fact that they are unpaid, and the absence of any evidence by the defendant indicating any basis that the bills for legal services rendered should not be paid.

19. The defendant states that, given the provisions of the Legal Profession Uniform Law, the court is not permitted to hear the proceedings as the plaintiff is not entitled to commence legal proceedings unless the Bill of Costs has been assessed. This is said to flow from a lack of compliance with the disclosure provisions of the Uniform Law relating to Cost Agreements between solicitor and client. The plaintiff argues that he did comply with the disclosure requirements although he concedes that the disclosure statements in the Costs Agreement refer to the previous legislation, being the Legal Profession Act 2004 (NSW) and Legal Profession Regulation 2005 (NSW), now repealed. The parties’ submissions in relation to the disclosure requirements will be discussed further below. However the issue for determination is:

• Did the plaintiff comply with the disclosure requirements of the Uniform Law in the Cost Agreement with the defendants; and

• If not, what is the appropriate order to be made on the current proceedings?

Further issue for determination

20. A further issue arises for determination, which is similar to the issue identified by the parties, namely, whether the plaintiff, in the Bills of Costs issued to the defendants, complied with the requirements of the Uniform Law; namely the requirement to set out in the Bill of Costs the avenues open to the defendants to dispute the particular bill (as required by section 192 of the Uniform Law). As indicated above, I caused the registrar/ Chief Magistrate’s Office to invite the parties to make any further submission on this issue. The further issue for determination is:

• Did the plaintiff set out, in the Bills of Costs provided to the defendants, the avenues open to dispute the bill of costs, as required by section 192 of the Act; and

• If not, what is the appropriate order to be made on the current proceedings?

Evidence

21. As previously stated, the evidence in the hearing consisted of the plaintiff’s affidavit. The plaintiff was also cross-examined by the defendant’s Counsel. There was no evidence in the proceedings from the defendant. The initial engagement of the plaintiff by the first defendant, in October 2017, is not in dispute and is set out above. It is the case that the issue of outstanding legal fees said to have been incurred prior to April 2018 was resolved as at June 2018. The current proceedings are in relation to legal work undertaken after June 2018.

22. The plaintiff’s affidavit indicates that on 7 June 2018, the first defendant contacted him by email, a copy is annexed to the affidavit, requesting that Hodges Legal again act for defendants, in respect of the same Supreme Court proceedings. There was some discussion about outstanding bills, and it is said that on receipt of an agreed amount to address earlier bills owing to the plaintiff, the plaintiff again agreed to act for the defendants. The plaintiff states that during a meeting with the first defendant on Saturday, 30 June 2018, he was provided with documents indicating that there was a Notice of Motion listed for hearing in the Supreme Court on Monday, 2 July 2018. The plaintiff’s states that the evidence which had been filed by the other party in the Supreme Court proceedings was extensive, and the defendants had not filed any evidence in preparation for the upcoming Supreme Court proceedings.

23. The plaintiff states that he worked all that weekend and also the Monday morning to prepare as best as he could, on behalf of the defendants, for the Supreme Court proceedings. On 6 July 2018 he rendered a tax invoice for work done to 5 July 2018. The plaintiff states that there was a continuation of the Supreme Court hearing on 4 July 2018. On 11 July 2018 he rendered a further tax invoice for work done. The defendants’ Supreme Court case was listed on 27 July 2018 when final orders were made. There was further correspondence about the matter with the first defendant. On 3 August 2018 the plaintiff rendered a further tax invoice for work done after the previous invoice. The plaintiff ceased to act for the defendants on 20 September 2018. The plaintiff deposes in the affidavit to the fact the defendants have not paid any of the outstanding amounts due under the invoices issued from 3 July 2018.

24. No evidence was presented in the proceedings by the defendants and therefore the plaintiff’s evidence was essentially uncontradicted. Whilst the first defendant filed a defence, there was no evidence in support of anything stated in the defence. Further apart from assertions of problems with the quality of the plaintiff’s work and assertions that he was charged too much, the defence filed is confusing and difficult to follow. Even if the defence had greater clarity, where there has been no evidence presented in support of what is stated in the defence, the court has no evidence on which any findings of fact of matters asserted in the defence can be made.

25. It is not in dispute that if the plaintiff is found in these proceedings, not to have breached the notification requirements applying to Cost Agreements, in the Cost Agreement with the defendants, so that the disentitling provisions of the Uniform Law do not apply - then there is no evidence available on which it could be found that the plaintiff’s case is not established on the evidence on the balance of probabilities. On the evidence there are outstanding invoices, for services rendered as agreed, which the first defendant should pay. There remains a challenge to the legal liability of the second defendant in relation to the legal costs claimed by the plaintiff, this will be further detailed below.

Legislation

26. The Uniform Law regulates the legal profession in many respects, including as to disclosure requirements in Costs Agreements, and matters that must be set out in a Bill of Costs provided to a client. Relevant provisions of the Uniform Law are set out below. Section 3 provides for the objectives of the Uniform Law:

3 Objectives

The objectives of this Law are to promote the administration of justice and an efficient and effective Australian legal profession, by—

(a) providing and promoting interjurisdictional consistency in the law applying to the Australian legal profession; and

(b) ensuring lawyers are competent and maintain high ethical and professional standards in the provision of legal services; and

(c) enhancing the protection of clients of law practices and the protection of the public generally; and

(d) empowering clients of law practices to make informed choices about the services they access and the costs involved; and

(e) promoting regulation of the legal profession that is efficient, effective, targeted and proportionate; and

(f) providing a co-regulatory framework within which an appropriate level of independence of the legal profession from the executive arm of government is maintained.

27. The definitions contained in section 6 include:

“client” includes a person to whom or for whom legal services are provided;

“legal costs” means—

(a) amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services; or

(b) without limitation, amounts that a person has been or may be charged, or is or may become liable to pay, as a third party payer in respect of the provision of legal services by a law practice to another person—

including disbursements but not including interest...

28. Chapter 5 of the Uniform Law provides for the making of complaints, including in relation to a “consumer matter” which includes a dispute about costs. There has been no complaint made in the current matter. There was some reference in the defence filed as to the making of a complaint; the plaintiff gave affidavit evidence indicating no such complaint. Further the issue of whether there was evidence of a complaint being made was part of the material considered in determining the application to vacate the hearing date on 13 June 2019, and I was not satisfied that there was evidence of a complaint being made (the extempore reasons of 13 June 2019 may be referred to).

29. The Uniform Law provides at section 417 for the making of regulations:

417 Legal Profession Uniform Regulations

(1) The Standing Committee may make Legal Profession Uniform Regulations with respect to—

(a) any matter that by this Law is expressly required or permitted to be prescribed by Uniform Regulations; and

(b) any matter that is ancillary to a matter referred to in paragraph (a).

(2) The Uniform Regulations prevail over the Uniform Rules to the extent of any inconsistency.

30. Part 4.3 of the Uniform Law provides for requirements in respect of Costs Agreements between solicitor and client, and objectives are set out in Division 1 of Part 4.3, at section 169:

169 Objectives

The objectives of this Part are—

(a) to ensure that clients of law practices are able to make informed choices about their legal options and the costs associated with pursuing those options; and

(b) to provide that law practices must not charge more than fair and reasonable amounts for legal costs; and

(c) to provide a framework for assessment of legal costs.

31. Division 3 of Part 4 provides for disclosure requirements:

174 Disclosure obligations of law practice regarding clients

(1) Main disclosure requirement A law practice—

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

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

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

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

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

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

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

(iii) to receive a bill from the law practice and to request an itemised bill after receiving a bill that is not itemised or is only partially itemised; and

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

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

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

…

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

[Note subsections (4),(5),(7) and (8) provide for situations relating to where the costs are in the lower threshold or upper threshold, and are not relevant for the purposes of the current proceedings]

32. The effect of non-compliance with disclosure obligations is set out in section 178 of the Uniform Law:

178 Non-compliance with disclosure obligations

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

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

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

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

(d) the contravention is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any principal of the law practice or any legal practitioner associate or foreign lawyer associate involved in the contravention.

(2) 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, this section—

(a) does not affect the liability of the one to whom disclosure was made to pay the legal costs; and

(b) does not prevent proceedings being maintained against the one to whom the disclosure was made for the recovery of those legal costs.

(3) The Uniform Rules may provide that subsections (1) and (2)—

(a) do not apply; or

(b) apply with specified modifications—

in specified circumstances or kinds of circumstances.

33. The section 208 of the Uniform Law provides that the Legal Profession Uniform General Rules 2015 (NSW) (Uniform Rules) may make provision for legal costs:

208 Uniform Rules for legal costs

(1) The Uniform Rules may make provision with respect to any aspect of legal costs.

(2) Without limitation, the Uniform Rules may make provision with respect to the following—

(a) costs disclosure;

(b) costs agreements;

(c) costs billing;

(d) the payment of interest on unpaid costs;

(e) costs assessments.

34. Rule 72A(2) of the Uniform Rules provides that where the legal practice has contravened the disclosure provisions, section 178(1) and 178(2) of the Uniform Law do not apply where a court or tribunal or costs assessor is satisfied that:

(a) the law practice took reasonable steps to comply with the disclosure obligations of Part 4.3 of the Uniform Law before becoming aware of the contravention, and

(b) the law practice, no later than 14 days after the date on which it became aware of the contravention, rectified the contravention, as far as practicable, by providing the client with the necessary information required to be disclosed under Division 3 of Part 4.3 of the Uniform Law (including, where relevant, an estimate or revised estimate of the costs), and

(c) the contravention was not substantial and it would not be reasonable to expect that the client would have made a different decision in any relevant respect.

(3) Subrule (2) (b) applies even though the information or estimate is not provided at the times required by the disclosure obligations of Part 4.3 of the Uniform Law.

35. The Uniform Law provides for the form of the cost agreement in Division 4, at sections 179 – 185.

36. The Uniform Law also provides for the form of a Bill of Costs provided to a client – these provisions are referred to below.

Parties’ submissions as to disclosure requirements

37. It is the position of the defendants that the plaintiff did not comply with the disclosure requirements of the Uniform Law and therefore cannot maintain the present proceedings. The defendant submits that the Cost Agreement is void on two basis: firstly it incorrectly names the “client” in the agreement (the names are incorrect in the written agreement, neither the first or second defendant are named, see below); and secondly because the cost agreement was not given to, or discussed with the second defendant. It is submitted that at no time were instructions taken from the second defendant by the plaintiff and therefore the Cost Agreement was not properly entered into with the second defendant. It is submitted also that, as the “client” is the first and second defendant, then non- disclosure of the Cost Agreement to the second defendant means that there was not proper disclosure to the “client”. On this basis it is argued that the disclosure provisions to “the client” were not complied with, even if the terms of the Cost Agreement are found to have been disclosed to the first defendant. Essentially the defendant argues that the “client” is indivisible, it is one client, even though two persons.

38. The plaintiff submits that there was compliance with the disclosure requirements. The plaintiff concedes he did not enter into an agreement with the second defendant or take instructions from the second defendant, or give the Cost Agreement to the second defendant. The plaintiff was instructed by the first defendant to act for both the first and second defendant in legal proceedings.

39. The plaintiff concedes that the written Cost Agreement refers to the Legal Profession Act2004 which was repealed in 2015. The plaintiff relies on the decision of the Supreme Court in Frontier Law Group Pty Ltd v Barkman [2016] NSWSC 1542, as noting that the provisions of the current Legal Profession Uniform Law 2014 (the Uniform Law) (sections 174, 178, 185, and 194), substantially reproduce those of its predecessor, the Legal Profession Act 2004 (NSW) (sections 309, 317, 326 and 331 respectively).

40. The plaintiff also, at paragraphs 13 through to 16 of written submissions, relies upon the transitional provisions in Schedule 4 of the Uniform Law. With respect these submissions appear misconceived as the transitional provisions would not apply to the current Costs Agreement because the Cost Agreement was entered into on a date (October 2017) when the legislation which applied to the Cost Agreement was the Uniform Law. The reference to the former legislation in the Cost Agreement of 2017 does not bring the transitional provisions into play.

41. However the plaintiff’s submission that the Uniform Law essentially reproduces the disclosure provisions of the predecessor legislation is a relevant submission to the issue of whether, in the terms of the particular Cost Agreement, the plaintiff has complied with the disclosure requirements of the Uniform Law. The Cost Agreement is stated to be between the plaintiff and both defendants. The defendants are husband and wife. It is conceded by the plaintiff that he had no time met the first defendant’s wife, nor did he send a copy of the Cost Agreement to the first defendant’s wife, nor did he receive separate instructions from the first defendant’s wife, who is the second defendant in these proceedings.

The terms of the Cost Agreement

42. The cost agreement was for legal work, in relation to a joint venture between the first and second defendant, and Sivapragasam Shanmugathaas and Suganthiny Shanmugathaas.

43. The Cost Agreement states:

“Sivapragasam Shanmugathaas and Suganthiny Shanmugathaas (the client) have asked the solicitor to act in relation to issues arising from a Joint Venture Agreement with Sivapragasam Shanmugathaas and Suganthiny Shanmugathaas (the first and second defendants). There was previous litigation and a deed of settlement but the settlement has broken down. The legal work covered by this Cost Agreement is expected to be what is required to resolve the issues between the parties in a cost effective and efficient way”.

44. The plaintiff concedes that he incorrectly named as “the client” in the Cost Agreement the other party in the joint venture dispute. However he maintains that the agreement was a binding contract, in terms of the written Cost Agreement, given that both the plaintiff and the first defendant understood that they were making the agreement, they acted in furtherance of the agreement, and the mistake as to a name was a mistake or error only, which does not invalidate the agreement.

45. The Cost Agreement between the parties provides for acceptance, termination and costs, explanation of engagement of a barrister or an expert, and explanation of other matters. Attached to the Agreement is the disclosure document (“Costs Disclosure/Estimate”). That document details how costs are calculated, the hourly rates for solicitors, paralegals, secretaries etc; photocopy and email charges and travel costs; expenses; and an estimate of the costs. The document provides estimates of costs for various stages of the proceedings. The document sets out billing arrangements, interest on costs; costs in court proceedings; alternative special costs arrangement; changes. The document also states at paragraph 8 :

8. Rights as to costs

You have the following rights in relation to legal costs:

- you can negotiate a costs agreement;

- you have the right to a bill of costs;

- if the bill is a “lump sum” one, you have the right to ask for an itemised bill;

- you can ask for written reports about the progress of your matter;

- you can apply for assessment of my costs within 12 months of receiving the bill;

- you can apply to have costs disputes mediated if the amount in the dispute is less than $10,000

46. The introductory sentence of the “Costs Disclosure/Estimate” document states:

The Legal Profession Act 2004 NSW requires that information about the costs of legal services be provided to the client. This document seeks to comply with those requirements.

47. Clause 5 of the Costs Disclosure/Estimate document sets out the estimated costs of the matter, which included: $4000-$6000 for initial instructions, reading of material and advice; $10,000-$20,000 if matter resolved without court hearing, $10,000-$25,000 for preparation for a defended hearing; and for a hearing the estimate was “$20,000 (really only a guess when the issues are not known)”.

48. Clauses 1,2,3 set out how the costs are calculated, including hourly fees for solicitor, paralegal etc; and charges such as photocopying, email etc. are set out. The billing arrangements and interest which may apply are explained at clauses 6 and 7 and clause 8 advises that any change will be notified. Costs in court proceedings are explained at clause 10.

49. In considering the effect of the errors in the agreement, both as to the name of the clients, and the reference to repealed legislation, I have considered whether I may construe the Cost Agreement according to its substance, or whether there is a need for strict compliance with the required form of such agreement. It may be that where the contract is between a solicitor and a client, in a consumer protection context, that an absence of form may invalidate the agreement. The formal problems with the cost agreement include that the client is not named – the plaintiff has instead named a party in the Supreme Court proceedings – and the disclosures refer to the repealed law (the Legal Profession Act and Regulation).

Other indicia of agreement

50. That agreement was reached between the first defendant and the plaintiff is indicated by the actions in support of the agreement set out in the Cost Agreement – the defendant’s payment of money into trust and the plaintiff commencing to act in the Supreme Court proceedings. There was in substance an agreement between the first defendant and the plaintiff as set out in the cost agreement. The email correspondence attached to the plaintiff’s affidavit make this clear. An email of 6 October 2017 is sent by the plaintiff to the first defendant, and is in response to an email of 5 October 2017 from the first defendant requesting that the plaintiff start acting for him. The email states:

“if you want me to act, we will need to do the following immediately: 1) . The instructions to your current lawyer; 2) sign a costs agreement;3) you deposit $3000 into my trust account…

51. A subsequent email of 8 October 2017 states “thanks for taking my matter…”.

52. An authority/direction to the previous lawyers is signed by the first defendant on 9 October 2017 and directs the previous lawyers forward the file to the plaintiff. In an affidavit the plaintiff states that he sent the cost agreement in a separate email on 9 October 2017 to the first defendant. He filed a Notice of Change of solicitor on behalf of the defendants on 12 October 2017. The first defendant paid a lump sum amount of $3000 into the plaintiff’s trust account on 17 October 2017. An itemised Tax Invoice or bill of costs was issued to the defendants by the plaintiff on 11 December 2017 which charged costs in accordance with the cost agreement. There was email correspondence in December 2017 and January 2018 between the parties in relation to the Bill of costs. There was continuing disagreement about costs and the plaintiff filed a notice of Ceasing to Act for the defendants in the Supreme Court proceedings on 28 February 2018.

53. Annexed to the plaintiff’s affidavit are emails between the parties of June 2018. Those emails refer to payment of an agreed amount for outstanding legal fees, and to the first defendant’s request for the plaintiff to again represent him in the Supreme Court proceedings relating to the joint venture. In particular in an email of 25 June (annexure K to affidavit) the plaintiff sets out requirements to be met if he is to act for the first defendant again, including timely provision of instructions, and “that we revert to the previous costs agreement where my bills are to be paid monthly, or, as an alternative to monthly payment of my invoices, costs are allowed to accrue until the end of the case. Interest would run on the outstanding balance. I would lodge a caveat to protect my interest…” The plaintiff further states that he is not acting yet for the first defendant until such time as he formally files a new notice of acting.

54. Further email correspondence of 27 June 2018 (Annexure L to affidavit) from the plaintiff to the first defendant notes that the first defendant has paid $1500, not $2500 as required/agreed. It also notes “Now I learn your case is in court on 2 July…”. It further states “I assume from your emails you are giving me the following assurances: 1) that my requests for instructions are answered in a timely fashion, 2) that we revert to the previous costs agreement where my bills are to be paid monthly….”

55. The plaintiff’s affidavit also refers to discussions after the hearing on 27 July 2018 where the first defendant said he wanted the plaintiff to act in the dealings with the receiver, and attaches an email of 27 July 2018 to that effect (Annexure O to the affidavit).

56. Other documents annexed to the affidavit of the plaintiff include the receipt of 22 June 2018 for $1500 for part payment of account of 11 December 2018; and a receipt of 2 July 2019 for payment by the first defendant of $2000 “in part payment of account on 11 December 2018 and in service of costs for the meeting on 30 June 2018 and urgent preparation for court appearance on Monday 2 July 2018”. The invoice of 6 July 2018 indicates a bill for legal costs commencing from 30 June 2018. Subsequent invoices are dated 11 July (for period 6 July to 9 July) and 3 August (for period 11 July to 2 August) and 17 August (for period 3 August to 11 August).

Findings of fact

Was there an agreement between the parties?

57. There was no agreement between plaintiff and second defendant; the plaintiff concedes this. He never met the second defendant nor received instructions from her, nor entered into a cost agreement with her, nor did he provide her with a copy of the written costs agreement.

58. There was an agreement for provision of legal services, and payment of costs, between the plaintiff and first defendant – this is evidenced by the communications between the parties, set out above, and the provision of the written cost agreement by the plaintiff to the first defendant (albeit with an error in relation to the name of the client), and the payment of monies into trust and provision of instructions by the first defendant to the plaintiff, and by the plaintiff’s provision of legal services in accordance with the agreement.

Was work done by the plaintiff in accordance with the legal bills of costs issued?

59. The only evidence about this issue is the evidence of the plaintiff as the defendants provided no evidence in the proceedings. On the plaintiff’s evidence the court would find that the invoices issued were for legal work undertaken by the plaintiff on behalf of the first defendant, and that such invoices remain unpaid.

Did the plaintiff provide the required disclosures in the cost agreement?

60. I find that the disclosures in the written cost agreement substantially complied with the requirements of the Uniform Law – the required disclosures were set out, despite the reference in the costs agreement to the repealed legislation. This is seen in the extracts set out at paragraphs 43-48 above - the disclosures required by section 174 were contained in the cost agreement.

61. The issue which is determinative in this matter is the non-compliance with the requirements of the Uniform Law in relation to the Bill of Costs, as detailed below.

Evidence as to the Bills of Costs and findings as to effect of Uniform Law

62. The tax invoices/legal bills of cost sent by the plaintiff’s law practice to the first defendant for legal costs payable were dated 6 July 2018, 11 July 2018, and 3 August 2018. A final Tax Invoice was issued on 17 August 2018. There is some email correspondence in relation to disputes about legal costs charged, and some reference is made by the plaintiff to the first defendant having a right of independent review in one email, and at least one other email states the costs may be “assessed”. However these emails were not, on the evidence, sent with the Bills and appear to be part of general discussions between the parties.

63. The way a Bill of Costs is to be given to a client, and the information it must contain, are set out in the Uniform Law at Division 5, section 186-193. In particular the Bill of Costs must include, or be accompanied by a written statement setting out the avenues available to a client in relation to a dispute about costs and applicable time limits:

192 Notification of client’s rights

A law practice must ensure that a bill includes or is accompanied by a written statement setting out—

(a) the avenues that are open to the client in the event of a dispute in relation to legal costs; and

(b) any time limits that apply to the taking of any action referred to in paragraph (a).

64. Rule 73 of the Uniform Rules provides for how the Bill of Costs, under section 189 of the Uniform Law, may be given to a client but does not otherwise specify any details as to how section 192 is to be complied with, in terms of the requirement to set out “the avenues that are open to the client in the event of a dispute in relation to legal costs”.

65. Division 6 of Part 4.3 of the Uniform Law provides restrictions on proceedings to recover legal costs. In particular section 194(1) states:

194 Restriction on commencing proceedings to recover legal costs

A law practice must not commence legal proceedings to recover legal costs from a person unless a bill has been given for the legal costs and the bill complies with the requirements of this Law and the Uniform Rules.

[Note – subsection (2) provides further limitations where the bill is subject of a costs dispute as well as a thirty day period before commencing proceedings from when the bill is issued or where there has been a request for an itemised bill].

66. None of the Bills issued by the plaintiff to the defendant specifically set out any details as to “avenues open [to the defendant] in the event of a dispute in relation to legal costs”. The bills/tax invoices all contain the same statement:

“The Legal Profession Act and Regulations require that a solicitor advise clients of their right to have bills from the solicitor independently reviewed. So, you are entitled to challenge this tax invoice should you want to do so.”

67. The question which arises is whether this wording (putting to one side that it refers to repealed legislation) meets the requirement to set out the “the avenues that are open [to the defendant] in the event of a dispute in relation to legal costs”. It does not set out the avenue where independent review may be obtained, and whilst it refers to an entitlement to challenge the tax invoice it does not set out the avenue by which this may be accessed or pursued.

68. The word “avenue” is not a word of common legal usage; nor is it defined in the legislation. The Macquarie Dictionary definition is “means of access or attainment”.

69. The Oxford Dictionary definition states “a way of access or approach; a passage or path of entrance or exit. (Formerly a regular military term.) Now chiefly figurative”.

70. Applying the ordinary meaning of “avenue” to the use of the word in the context of the statute, the requirement to set out “the avenues that are open to the client”, is a requirement to set out the means or ways that are open to the client in the event of a dispute in relation to legal costs. The requirement is that the means available to the client to dispute the bill of costs be set out – this must include the requirement to set out the means provided under the statute itself - such as a consumer complaint about the bill, or an application to have the bill assessed. To merely state that there is a right of independent review, but not state by whom, cannot be sufficient to meet a statutory requirement to set out the avenues (or means of attainment) open to the client who disputes a Bill of Costs.

71. In my view this interpretation of what is required will give effect to the objects of the Uniform Law set out is section 3 of the Act, and in particular, the consumer protection object specified in subsection(c) and the empowerment and information focus of subsection(d):

(c) enhancing the protection of clients of law practices and the protection of the public generally; and

(d) empowering clients of law practices to make informed choices about the services they access and the costs involved;

…

72. This interpretation is also consistent with the objects of Part 4.3 of the Uniform Law at section 169:

169 Objectives

The objectives of this Part are—

(a) to ensure that clients of law practices are able to make informed choices about their legal options and the costs associated with pursuing those options; and

(b) to provide that law practices must not charge more than fair and reasonable amounts for legal costs; and

(c) to provide a framework for assessment of legal costs.

73. I therefore find that the plaintiff’s Bills of Costs, issued to the defendant in the current matter, have not complied with the requirements of section 192 of the Uniform Law.

74. The next issue is the effect on the current proceedings, and the order which should be made, given the above findings. I note the observations of the Supreme Court in Frontier Law Group Pty Ltd v Barkman [2016] NSWSC 1542:

The Legal Profession Act 2004 (NSW) was repealed by Legal Profession Uniform Law Application Act 2014 (NSW), s 167(a), and in turn replaced by Legal Profession Uniform Law 2014 (NSW) with effect from 1 July 2015. The Court notes the provisions of the current Legal Profession Uniform Law 2014 (NSW), ss 174, 178, 185 and 194, substantially reproduce those of its predecessor Legal Profession Act 2004 (NSW), ss 309, 317, 326 and 331 respectively…… it is likely that the old legislation, Legal Profession Act 2004 (NSW) applies. However for completeness the Court will also make reference to the equivalent sections which currently exist in Legal Profession Uniform Law 2014 (NSW).

Briefly summarised, the structure of the legislation is as follows. A law practice such as that of this plaintiff solicitor is required to disclose various matters to a client, concerning the basis on which legal costs will be calculated and an estimate of the total legal costs, together with certain ancillary matters (Legal Profession Act, s 309; Legal Profession Uniform Law, s 174). If the law practice does not do that and contravenes the legislation, the costs agreement may be set aside (Legal Profession Act, s 317(3); see also Legal Profession Uniform Law, s 178, which provides that a failure to disclose would render the costs agreement void). Costs agreements that contravene the legislation and are set aside have the consequence that the client is not required to pay the legal costs incurred under them, until those costs have been assessed or any costs have been determined (Legal Profession Act, s 317(a); Legal Profession Uniform Law, s 178(1)(b)). Finally, a law practice must not commence legal proceedings to recover legal costs from a person unless a bill has been given for the legal costs and the bill complies with the requirements of this law and the Legal Profession Uniform Law (Legal Profession Act, s 331; Legal Profession Uniform Law, s 194)…..

There are so many failures to comply with these requirements that, in my view, on the evidence before the Court, it can confidently be said that this claim has no demonstrated prospects of success.

Let me illustrate just three of the problems. First, there is the issue of proof of the costs agreement. In my view, the solicitors have not proved, even to the prime facie level, that they have made adequate disclosure in compliance with Legal Profession Act, s 309 (Legal Profession Uniform Law, s 174) in respect of the legal services the subject of the charges for legal services claimed in these proceedings. The costs agreement, on its face, appears to comply with Legal Profession Act, s 309(1)(b) (Legal Profession Uniform Law, s 174(2)). But, in the absence of any bill or invoice, which connects the costs agreement in question with some legal services provided, it is not possible to say whether disclosure complying with the legislation in respect of those legal services and those costs has been provided.

Secondly, even if one were to assume the costs agreement before the Court is the one that applies to the legal services for which the solicitor’s charges have been claimed, the disclosure contained in the costs agreement is, in my view, incomprehensible. The costs agreement takes the extraordinary step of providing a "total estimate of costs and disbursements" in a purported attempt to comply with s 174(1) (see Legal Profession Act, s 309(c)) by asserting that the total legal costs will be "between $2,200 - $55,000". In other words, the upper limit of the amount claimed is more than twenty times the lower limit. In my view, that is on its face, so wide a range as to provide no guidance to any client and is not, on any rational basis to be described as an "estimate of the total legal costs" that complies with the legislation.

The third problem is that the costs agreement in question does not appear to relate to the amount claimed in the caveat, given there are some twenty files for work done between this solicitor and this client. This is important because in order to sue upon this costs agreement, a law practice must be able to surmount the prohibition in Legal Profession Uniform Law, s 194 (Legal Profession Act, s 331) that it must not commence legal proceedings unless a bill has been given for legal costs and the bill complies with the requirements of “this Law and the Uniform Rules”. It seems impossible for the solicitor to be able to establish a right to commence these legal proceedings, unless a memorandum of costs is tendered, which, on its face, complies with the law and the Uniform Law [emphasis added].

75. As is clear from the wording of the Uniform Law and the observations of the Supreme Court, set out above, the plaintiff must not commence legal proceedings unless a bill has been given for legal costs and the bill complies with the requirements of “this Law and the Uniform Rules”. For the reasons previously detailed I am not satisfied that the plaintiff has issued bills which so comply, and therefore the plaintiff must not commence legal proceedings to recover the unpaid costs.

76. As such I conclude that the current proceedings have been commenced in breach of the Uniform Law and as such cannot be maintained. I am of the view that the proceedings have been invalidly commenced and therefore must be dismissed by the court.

77. Before making a final order I will hear from the parties as to the form of order which should be made, and will also hear any application for costs.

Magistrate Huntsman

14 October 2019

**********

Decision last updated: 01 February 2021