Law Society of the Act v Goodman Law Pty Ltd
[2013] ACTSC 204
•27 SEPTEMBER 2013
LAW SOCIETY OF THE ACT v GOODMAN LAW PTY LTD
[2013] ACTSC 204 (27 SEPTEMBER 2013)
PROCEDURE – Costs – Disclosure and assessment – Referral of question from Registrar – whether there is an enforceable costs agreement – Legal Profession Act 2006 (ACT) s 300A
Legal Profession Act 2006 (ACT) ss 269, 271, 274, 277, 286, 287, 282, 288, 300, 300A, 304
Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355
No. SC 379 of 2012
Judge: Master Mossop
Supreme Court of the ACT
Date: 27 September 2013
IN THE SUPREME COURT OF THE )
) No. SC 379 of 2012
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:LAW SOCIETY OF THE ACT
Applicant
AND:GOODMAN LAW PTY LTD
Respondent
ORDER
Judge: Master Mossop
Date: 27 September 2013
Place: Canberra
THE COURT ORDERS THAT:
1. The question referred by the Deputy Registrar under rule 6255 be answered “No”.
2. Unless any party notifies my associate by email within seven days that it wishes to be heard in relation to costs, the respondent is to pay the applicant’s costs of the referral of the question under rule 6255.
This is an issue referred to a judicial officer pursuant to rule 6255 of the Court Procedures Rules. The issue was referred by a deputy registrar of the Court who is conducting a costs assessment. Rule 6255 permits the Registrar to refer an issue in a proceeding to a judicial officer of the Court if the Registrar considers that it would be appropriate for the issue to be decided by a judicial officer. The reference to the Registrar includes a deputy registrar: r 5(4).
The issue referred to me is the following question:
Is there an enforceable cost agreement in place between the respondent and its client Mr Biginell such that I must assess the disputed legal costs by reference to that agreement?
The background to the application, over which there is no dispute, is as follows.
On or about 26 June 2009 Mr Biginell retained the Respondent to act as his solicitors in the conveyance of a residential two bedroom unit in Gordon in the Australian Capital Territory that he was purchasing for $315,000. A senior associate solicitor employed by the Respondent had the conduct of the matter at all relevant times. The respondent caused to be sent to the client a letter dated 2 July 2009 with two annexures, a document headed “Cost Disclosure Purchase/Sale of Residential Property” and a document headed “Fee & Expenses Schedule Purchase/Sale of Residential Property”. I will refer to these documents collectively as the “July documents”. Although the meaning of these documents will be examined in detail later, it is worth noting at this point that a fixed component of professional fees was identified in these documents as being $940 plus GST or $1,034 in total.
During the course of the conveyancing transaction, the respondent performed extra work on behalf of Mr Biginell which was incidental to the conveyance. This work included dealing with a new proposed mortgagee, a home buyer stamp duty concession application, and a lost bank cheque for the payment of unpaid strata title levies.
Settlement of the conveyance occurred on 6 October 2009. A small amount of work then took place with respect to letters of attornment and the replacement of the lost bank cheque.
Forty eight days after the settlement, the Respondent sent an email to Mr Biginell on 23 November 2009 providing an estimate of additional professional fees within the range of $5,000 to $6,000.
On 30 November 2009 the respondent issued a tax invoice to Mr Biginell for $6,943.95. Mr Biginell objected to the amount that he was charged and various discussions took place between Mr Biginell and the respondent in an effort to settle the dispute concerning those fees. The respondent filed a bill of costs dated 5 May 2010 in the Supreme Court itemising the professional fees and disbursements at a total of $8,007.40.
On 22 May 2010 Mr Biginell made a complaint to the applicant. As a consequence, s 304 of the Legal Profession Act 2006 (“the Act”) prevented the costs assessment proceeding.
In the course of investigating Mr Biginell’s complaint, the applicant filed its Originating Application for Costs Assessment dated 19 November 2012 seeking an assessment of the legal costs billed by the respondent to its former client Mr Biginell. Section 409 of the Act permits the applicant to make such an application. The costs to be assessed are those set out in the respondent’s tax invoice dated 30 November 2009.
Before the Deputy Registrar the respondent submitted that the July documents constituted a costs agreement and that s 300A of the Act applied to the assessment. That section permits the costs to be assessed by reference to the costs agreement. The applicant contends that s 300A does not apply with the consequence that costs must be assessed under s 300. That section provides, in summary, for an assessment of “fair and reasonable costs” as opposed to the costs that might be payable in accordance with the terms of a costs agreement.
It was as a consequence of these competing positions that the Deputy Registrar referred to me the issue identified at [2] above.
The provision of the Legal Profession Act which gives rise to the question that has been referred is s 300A. That section provides:
300AAssessment of costs by reference to costs agreement
(1)The Supreme Court must assess the amount of any disputed legal costs that are subject to a costs agreement by reference to the provisions of the costs agreement if—
(a)a relevant provision of the costs agreement specifies the amount, or a rate or other means of working out the amount, of the costs; and
(b)the agreement has not been set aside under section 288 (Setting aside costs agreements);
unless the Supreme Court is satisfied—
(c)that the agreement does not comply in a material respect with any applicable disclosure requirements of division 3.2.3 (Costs disclosure); or
(d)that division 3.2.5 (Costs agreements) prevents the law practice concerned from recovering the amount of the costs; or
(e)that the parties otherwise agree.
(2) The Supreme Court is not required to initiate an examination of the matters mentioned in subsection (1) (c) and (d).
In referring to the various provisions of the Legal Profession Act 2006, I have referred to the current provisions of that Act. Neither party presented their submissions by reference to the terms of the Act that were in force as at July 2009 and I have proceeded on the basis that there are no relevant differences.
The three arguments put by the applicant are, in summary:
(a) the July documents do not comprise “a costs agreement” for the purposes of the Legal Profession Act;
(b) the costs agreement does not comply with s 300A(1)(a) in that no relevant provision of the costs agreement specifies the amount, or a rate or other means of working out the amount, of the costs;
(c) the costs agreement does not comply with s 300A(1)(c) in that the agreement does not comply in a material respect with an applicable disclosure requirement of division 3.2.3 (costs disclosure).
The July documents
Each argument requires an understanding of the content of the July documents.
The documents were sent to the client by email. Relevant portions of those three documents are set out below. I have underlined passages of the documents in the extracts below and identified each underlined passage by a number in square brackets. Later in these reasons when I refer to a particular portion of the documents I will refer to it by the bracketed number so as to make clear what I am referring to.
The covering letter dated 2 July 2009 provided:
We refer to your above matter and would like to thank you for instructing us to act on your behalf.
The work we will undertake on your behalf will include [1]:
·All conferences and telephone attendances on you
·Liaising with the Agent
·Liaising with any Mortgage Broker or where relevant
·Liaising with the Solicitors acting for the Vendor
·Reviewing the Contract with you
·Undertaking all relevant searches and rating enquiries
·Liaising with any incoming Mortgagee(s) where relevant
·Preparing the matter for Settlement
·Attending at Settlement and reporting to you thereon
·Attending to all post-Settlement requirements
Please find enclosed our Cost Disclosure and our Fee Rate and Expenses Schedule for your information and attention. These documents set out the terms and conditions of our engagement and are to be read in conjunction with this letter. [2]
Professional Fees for this matter will be on an ‘Agreed Fee’ basis of $940.00 + GST which is payable prior to or on the day of Settlement. Any additional work that may be required as a result of a prolonged settlement or an increase in the complexity of the matter for any reason, may be charged in addition to the above Professional Fees. If there are any changes to the billing arrangements for any reason, you will be immediately notified.[3]
In addition to the Professional Fees, we will incur other costs (disbursements) in accordance with our Cost Disclosure and Expenses Schedule [4] and in conducting standard searches and enquiries on your behalf. These costs are also payable prior to or on the day of Settlement. However, in order to commence your matter, we will require $450.00 to be deposited into our Trust Account to cover our initial legal costs and disbursements. This amount may be paid directly into our Trust Account by cash, cheque or credit card.
Should you wish to pay by direct deposit or credit card, we also enclose a payment remittance form for completion.
The $450.00 to be deposited into our Trust Account is an estimate of the initial fees and disbursements only and we may request further money be deposited into our Trust Account.
Credit advice
Please note that your Credit Limit is $1500.00. If at any time your total fees and disbursements (including work in progress) exceed your credit limit, work on your file will be put on hold until such time as your fees are paid in full, and a further amount is deposited into our Trust Account in anticipation of further fees and disbursements. We will notify you once you have reached your limit. [5]
Please note that should a Solicitor be required to give you independent legal advice on mortgage and/or banking documents, this will incur an additional fee which will be determined at the time requested.
Should you have any queries, please do not hesitate to contact our office.
The second document that was provided was a document on the respondent’s letterhead as follows:
COST DISCLOSURE [6]
PURCHASE/SALE OF RESIDENTIAL PROPERTY
Your rights and information on the costs associated with your matter.[7]These conditions apply to all current Conveyancing matters in which you or any associated entities retain Goodman Law to act as your solicitors.
We may change these conditions by giving you written notice of the changes. This will apply to all services which are provided after we give you notice.
·You may seek independent legal advice before agreeing to the costs agreement proposed;
·You may negotiate the terms of a fee agreement;
·You are entitled to receive an Invoice. Upon request, within thirty (30) days of receiving your invoice, you may receive a fully itemised account;
·You are entitled to progress reports of your billings and to be notified of any substantial changes affecting costs;
·If there is a dispute over the costs, you can request the mediation of the dispute or independent assessment of the costs or seek to have the costs agreement set aside;
·A fee agreement you enter will show the basis on which the costs and disbursements will be calculated, estimate the total payable, or a range of estimates including major possible variables, when you should pay, the interest payable if you fail to pay, and the person you should speak to about any concerns; [8]
·A fee agreement will also estimate [9] the range of costs and disbursements that you might recover from the other party if you are successful and the range of costs and disbursements of the other party you may have to pay if you are unsuccessful. An order by a court for payment of costs and disbursements will not necessarily cover the whole of your costs and disbursements.
Any special arrangements made with you for particular matters will be in addition to these conditions. Please advise if you believe a fee agreement beyond this Cost Disclosure is required. [10]
We are required by the Legal Profession Act (“the Act”) to set out the terms of our engagement and also the basis on which costs will be charged together with an estimate of costs and disbursements. These costs are itemised in the attached schedule. [11]
1. Acceptance of Offer
If you accept this offer you will have entered into a costs agreement with us. [12] This means you will be bound by the terms and conditions set out in this document which includes being billed in accordance with it.[13] Acceptance of this offer may be made by any of the following ways:·oral acceptance;
·signing and returning a copy of this document;
·providing us with instructions after receiving this document; or
·deposit of requested trust monies into our trust account.[14]
If you fail to accept our offer within seven days of dispatch of this document, we may immediately withdraw our offer to act on your behalf.
2. Billing Arrangements [15]
Where Settlement occurs within the usual timeframe of approximately 4 to 6 weeks, we will render an account (“Tax Invoice”) approximately 2 days before Settlement which will be included in the cheque directions; or
Where Settlement occurs outside the usual time frame of approximately 4 to 6 weeks, an interim account(s) may be rendered and forwarded to you for payment within thirty (30) days or such earlier date as set out in the Tax Invoice “Terms or Due Date”. (Our fees are not contingent on payment by third parties to you).Our Invoice will include a brief narration of work undertaken on your behalf. Should you require a detailed explanation of our account, you should contact us within 30 (30) days.
When we send you an Invoice, we will charge $10 or 5% of our fees (whichever is greater) for sundries including all minimum photocopying, stationery, accounting and postage charges.
Administrative Charges – All internal and external administrative costs will be charged in billable 6 minute units [16] at a rate of $150 per hour for collection of outstanding accounts after 60 days.
If these payment arrangements do not work for you, please discuss an alternate payment arrangement immediately with the solicitor responsible for your matter.
…
9. Retention of Your Documents
…
We will send a letter to advise you once your matter has been closed and is pending archiving. You will then have a period of seven (7) days from dispatch of our letter to request any documents you may require from your file prior to the file being sent to our archiving storage site. Retrieval of any documents from your file after this period will be charged at a fee of $50 plus GST. In addition to collecting your file, if any collating, sorting or copying of documents is required, you will be charged at an hourly rate in accordance with our Fee Rate Schedule.[17] Payment of the above must be made in full prior to release of any documents.…
The third and final document attached was a document on the respondent’s letterhead which provided:
FEE & EXPENSES SCHEDULE
PURCHASE/SALE OF RESIDENTIAL PROPERTYFIXED FEE SCHEDULE
Inclusive of GST Professional Charge per ACT Conveyance $1,034 .00 [18] FEE RATE SCHEDULE
Exclusive of GST Inclusive of GST Principle, Partner, Consultants, Special Counsel $350 to $450 per hour $385 to $440 per hour Associate $295 to $350 per hour $324.50 to $385 per hour Solicitor (Depending on Experience) $220 to$280 per hour $242 to $308 per hour Other Trained Legal Staff (Who are not Solicitors) $180 per hour $198 per hour Secretarial and Paralegal Staff $90 to $210 per hour $99 to $121 per hour Other Rates may be set by Prior Notification EXPENSES SCHEDULE
[A table then set out a schedule of expenses which included in relation to photocopying “Bulk copying/collation charged on a time basis in accordance with the above Fee Rate Schedule [19], plus (where appropriate), time spent in collating and binding copies at $110 per hour (GST inclusive)”.]
[A further table headed ACT purchase and sale expenses set out particular amounts for particular items]
I will refer to these documents as:
(a) the Covering Letter;
(b) the Costs Disclosure; and
(c) the Fee & Expenses Schedule.
First argument – was there a costs agreement?
Submissions
The first argument of the applicant is that the July documents do not comprise a costs agreement. It submits that the documents do not state that it is an offer to enter into a costs agreement as required by s 282(4) of the Act. It submits that if there is an offer the documents do not set out what that offer is. The applicant submits that an “engagement” or retainer is not the same thing as a costs agreement. It draws attention to the costs disclosure document which says “please advise if you believe a fee agreement beyond this Cost Disclosure is required” and the fact that no subsequent fee agreement was entered into. It submits that all that was needed to be done was for the respondent to clearly include words such as “this is an offer to enter into a costs agreement” but that was not done.
The respondent submits that s 282(4) was complied with by the combination of:
(a)stating in the covering letter that the attached documents set out the “terms of our engagement”;
(b)the reference at passage [12] to acceptance of the offer leading to “entering into a costs agreement”;
(c)the statement at passage [13] that “you will be bound by the terms and conditions set out in this document”;
(d)the specification of means of acceptance at passage [14].
Consideration
Section 261 of the Act defines costs agreement as follows:
costs agreement means an agreement about the payment of legal costs.
Section 282 provides:
282Making costs agreements
(1)A costs agreement may be made—
(a)between a client and a law practice retained by the client; or
(b)between a client and a law practice retained on behalf of the client by another law practice; or
(c)between a law practice and another law practice that retained that law practice on behalf of a client; or
(d)between a law practice and an associated third party payer.
(2)A costs agreement must be written or evidenced in writing.
(3)A costs agreement may consist of a written offer in accordance with subsection (4) that is accepted in writing or by other conduct.
NoteAcceptance by other conduct is not permitted for conditional costs agreements (see s 283 (3) (c) (i)).
(4)The offer must clearly state—
(a)that it is an offer to enter into a costs agreement; and
(b)that the offer can be accepted in writing or by other conduct; and
(c)the kind of conduct that will be acceptance.
Example for par (c)
continuing to instruct the law practice in the matter after receiving the offer
NoteAn example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
(5)Except as provided by section 300A (Assessment of costs by reference to costs agreement), a costs agreement cannot provide that the legal costs to which it relates are not subject to costs assessment under division 3.2.7.
NoteIf it attempts to do so, the costs agreement will be void (see s 287 (1)).
(6)A reference in section 288 (Setting aside costs agreements) and in any prescribed provisions of this part to a client is, in relation to a costs agreement that is entered into between a law practice and an associated third party payer as mentioned in subsection (1) (d) and to which a client of the law practice is not a party, a reference to the associated third party payer.
Relevantly, the requirements that must be established for there to be a “costs agreement” are that:
(a) there is an agreement;
(b) the agreement is “about the payment of legal costs”;
(c) the agreement is, relevantly, between a client and a law practice retained by the client;
(d) the agreement is “written or evidenced in writing” which may include a written offer that is accepted in writing or by other conduct;
(e) if it is a written offer accepted in writing or by other conduct the offer “must clearly state”:
(i) that is an offer to enter into a costs agreement;
(ii) that the offer can be accepted in writing or by other conduct; and(iii) the kind of conduct that will be acceptance.
In the present case, any agreement was clearly one which arose from an offer that was accepted. There is nothing in the material that is before me which indicates that the client executed any agreement with the respondent. There was space at the bottom of the second document for the “Client Representative Signature” although it was not in fact signed.
That means that the requirements in (e) above needed to be complied with. In particular the offer was required to “clearly state” that it was an offer to enter into a costs agreement. In my view the July documents fail to comply with s 282(4) in that they do not “clearly state” that one or other of them or all of them constitute an “offer to enter into a costs agreement”.
The July documents are a confusing mixture of a statement about the scope of the retainer given to the respondent, costs disclosures and elements which may form part of a costs agreement. The Covering Letter contains a mix of information about the scope of the retainer, the fees to be charged and the credit arrangements. It refers at passage [2] to the “Cost Disclosure and our Fee Rate and Expenses Schedule”. Those documents are said to set out “the terms and conditions of our engagement” and are to be read “in conjunction with” the letter. Nothing in this collection of words makes the statement required by s 282(4) and certainly does not do so “clearly”.
The balance of the letter contains important information about fees. In particular passage [3] identifies the matter as proceeding on an “Agreed Fee” basis. Read as a whole, the paragraph requires that if there is to be a change from the agreed fee basis of charging there will be immediate notification of the client. In my view it is not open to read the third sentence of passage [3] as limited to issues such as billing intervals. It must relate to any change from the agreed fee basis not only because of its context, immediately following the possible reasons why a departure from that basis of charging might occur, but also because unless that was the case, the lack of precision in the second sentence, when read with the dot points in the letter, would mean that whether or not to charge on a fixed fee basis was largely a discretionary matter for the solicitor.
The next references that might be considered to “clearly” state that what was involved was an offer to enter into a costs agreement is passage [12]. This is in fact the closest that the documents come to clearly identifying themselves, or some of them, as a costs agreement. However, that passage does not “clearly state” that the July documents are an offer to enter into a costs agreement. That is because notwithstanding the words in passage [12]:
(a) it does not explicitly identify that it is an offer to enter into a costs agreement;
(b) passage [12] appears, confusingly in a context which refers to it being a “Cost Disclosure”: passage [6];
(c) it anticipates, confusingly, that a fee agreement showing particular things might be entered into in the future: passages [8], [9];
(d) it anticipates, confusingly, that a “fee agreement beyond this Cost Disclosure” may be required by the client: passage [10].
The passage that does refer to a “costs agreement” (passage [12]) does not clearly define what the agreement would comprise and hence, working backwards, if it is to be construed as being an offer, it is not possible to tell what the offer comprises. The clause refers to “the terms and conditions set out in this document”. The document is a four page document which makes reference to the attached schedule but does not explicitly say that the covering letter is part of the document or would form part of the costs agreement. Further it is not clear whether that portion of the document above passage [11] is part of the offer. On the one hand it is in the document but it appears before passage [11] and the numbered paragraphs that follow.
In my opinion, the reference in s 282(4) to the fact that the offer must “clearly state ... that it is an offer to enter into a costs agreement” means more than that, in accordance with ordinary principles of contractual interpretation, it is possible to discern that it constitutes an offer to make an agreement in relation to costs. General contract law will do its best to make sense of, and give a sensible operation to, a confusing mass of documentation such as is present here. However, no doubt for sound consumer protection reasons, not only has the legislation required that the offer “state” that it is an offer to enter into a costs agreement but that it must do so “clearly”. That is not a requirement where there is a written agreement entered by the parties not constituted by an offer and acceptance. Where there is such a written agreement it will be clear to the client that the client is entering an agreement and what the agreement is. Where the agreement is entered into as contemplated by s 282(3)–(4), an approach which is often the most practical one to adopt, it will not necessarily be clear to the client that they are being made an offer in relation to legal costs which will give rise to an agreement. The requirement to state so clearly is an attempt to make it more likely that a recipient, who is often a lay-person completely unfamiliar with the law of contract, will understand that they will be entering into an agreement and making it clear what the agreement is. That latter point, namely, being clear as to what would constitute the agreement if it is accepted, is important because there may be a difference between the costs disclosure and the costs agreement and there is also the potential for confusion from other communications between lawyer and client on the subject of costs.
In my opinion, because the July documents nowhere state that they constitute an offer to enter into a costs agreement and also because of the confusing context in which the only reference to a costs agreement appears, they do not comply with the requirement that they “clearly state” that they are an offer to enter into a costs agreement. That means that, even if as a matter of general contract law they have given rise to an agreement, the offer made did not comply with s 282(4) of the Act.
Section 287 clearly sets out the consequences of non-compliance with s 282. It provides:
287Certain costs agreements void
(1)A costs agreement that contravenes, or is entered into in contravention of, any provision of this division is void.
(2)Subject to this section and division 3.2.7 (Costs assessment), legal costs under a void costs agreement are recoverable as set out in section 279 (b) or (c) (On what basis are legal costs recoverable?).
(3)However, a law practice is not entitled to recover any amount in excess of the amount that the practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received.
...
Hence even if, as appears to be common ground, an agreement about the payment of legal costs was reached in accordance with the ordinary rules of contract, because the offer contravened s 282(3)–(4) it is rendered void by s 287. That means that the question posed for my determination must be answered “No”.
That conclusion makes it strictly unnecessary to address the other arguments advanced by the applicant. However, since the points were fully argued and, in case I am wrong on the first argument, I will deal with the second argument and give some consideration to the third argument.
Second argument – s 300A(1)(a)
Submissions
The applicant submits that the requirement of s 300A(1)(a) is not satisfied because the requirement that “the costs agreement specifies the amount, or a rate or other means of working out the amount, of the costs” has not been complied with. The applicant submits that although the July documents specify an amount to be charged for the actual conveyance they do not make any specific provision in relation to the manner in which the costs to be charged for any additional work are to be calculated. It submits that the documents do not clearly and unambiguously advise the client of the basis on which the legal costs for all “additional work” will be worked out. It submits that the client has not been advised that work will be charged in accordance with the fee rate schedule or that it will be charged in six minute units. While there are other parts of the documents which make specific reference to charging in accordance with the fee rate schedule, there is no clear statement that those rates will apply to additional work. It points to the terms of the letter which indicate that notification will be given to the client if the costs reach $1,500.
The respondent submits that pursuant to s 286 a costs agreement may be enforced “in the same way as any other contract”. It relies upon the documents specifying an amount or a rate or other means of working out the amount of the costs. It points to the agreed fee of $940 plus GST which is the same as the professional fees identified in the first item of the Fee & Expenses Schedule of $1,034 including GST. It also submits that the documents contemplate that additional fees may be charged because of “prolonged settlement or an increase in the complexity of the matter for any reason”. In that situation it points to the Fee Rate Schedule as providing the means for “working out” the amount to be charged. It also points to the Expenses Schedule which sets out the amount or way of calculating the various possible disbursements. It submits that it is not the purpose of the Act to set out a template for costs agreements but instead permits any question of lack of clarity to be resolved by ordinary principles for construing a contract.
Consideration
The July documents are a confusing amalgam. The Costs Disclosure document appears to be a combination of a form for a statutory costs disclosure and a form for a costs agreement. The applicant is correct in saying that there is no specific text which says that the hourly rates identified in the Fee & Expenses Schedule will apply in relation to “additional work” referred to in the Covering Letter. Rather, the only text which makes specific reference to the application of those hourly rates is that at passages [17] and [19].
The respondent’s submission that when one looks at the collection of documents as a whole, notwithstanding the difficulties of their drafting, it can be discerned in accordance with ordinary principles of contractual interpretation that the hourly rates would apply to the additional work is one that might have been accepted if it was not for the terms of the Covering Letter. In relation to that letter the following features are of significance.
(a) At passage [2] the letter does refer to the “Fee Rate and Expenses Schedule” (intending to mean the Fee & Expenses Schedule) but does not state which part of the schedule is applicable or make any reference to the application of hourly rates.
(b) The first sentence of passage [3] identifies that “Professional Fees” will be on the “Agreed Fee” basis. That is consistent with the heading in the Fee & Expenses Schedule and the bolded figure of $1,034 in that schedule since $940 + GST is $1,034. The next sentence contemplates that additional fees may be charged but does not specify the rates at which they are to be charged. The third sentence, as I have interpreted it, means that there will be immediate notification if there is any change from the Agreed Fee method of charging. Once again it does not specify the basis upon which those additional fees will be charged and makes no reference to the Costs Disclosure or the Fee & Expenses Schedule.
(c) The text in passage [4], refers to the “Costs Disclosure and Expenses Schedule” is clearly limited to “disbursements” (although query whether that is what was intended having regard to the capacity to time charge for administrative costs referred to in the Expenses Schedule part of the Fee & Expenses Schedule).
(d) The text under the “Credit Advice” heading (passage [5]) is consistent with the limitation on “Professional Fees” to $1,034 and the statements at passage [3] that there will be immediate notification if there are to be any additional fees charged. I note however that there is substantial room for confusion as to whether or not the $1,500 credit limit is in addition to or inclusive of the amount of $450 described as for “legal costs and disbursements” or alternatively for “initial fees and disbursements” which is identified in the immediately preceding paragraphs.
The acceptance of the “offer” comprised by the amalgam of the July documents could be interpreted, having regard to the terms of the second sentence of passage [3], as imposing an immediately binding obligation to pay any additional fees incurred by reason of “a prolonged settlement or an increase in the complexity of the matter for any reason”. However that passage did not specify what those fees would be. It placed on obligation on the respondent to “immediately” notify the client.
It is likely that, if the threshold for the charging of additional fees (however vague it was) was reached, the respondent would have proposed the hourly rates set out in the Fee & Expenses Schedule and an unsophisticated client may well have accepted those rates. However, that is not enough to imply into the agreement arising out of the July documents an agreement to pay at those rates, subject only to “notification” of the changes to billing arrangements. Rather, in my view, there was an immediately binding agreement to pay the “Agreed Fee” amount of $1,034 plus disbursements referred to in passage [4]. Changes to those billing arrangements would be notified and then, potentially, subject to a further agreement. That might be regarded as a rather cumbersome process but, given that the confusing melange of documentation proffered by the respondent, there is no reason to adopt a construction most beneficial to its interests: see Lewison & Hughes, The Interpretation of Contracts in Australia at 7.08.
Section 300A(1)(a) is a limitation that applies in relation to the “disputed legal costs” referred to in the opening words of subsection (1). In the present case there is, as I understand it, no dispute about the fixed fees of $1,034. The disputed costs are those which go beyond those fixed fees. In my opinion there is no “provision of the costs agreement that specifies ... a rate or other means of working out the amount” of those disputed costs. Therefore there is no obligation on the Court to assess the disputed legal costs by reference to the provisions of the costs agreement under s 300A.
Therefore even if I am wrong about my conclusion on the first question the answer to the question posed by the Deputy Registrar would be the same.
Third argument – s 300A(1)(c)
Submissions
In relation to s 300A(1)(c) the submissions of the parties involve a clear difference in interpretation of the scope of the relevant provision. The applicant submits that the effect of paragraph (c) is that if there is non-compliance in a material respect with any of the applicable disclosure requirements in division 3.2.3 relevant to the agreement then the costs agreement cannot be enforced. It submits that such an interpretation is consistent with the use of the present tense in the paragraph (“does”) and the consumer protection objectives of the Act.
On the other hand the respondent submits that paragraph (c) is limited to situations where the agreement itself does not comply with any applicable disclosure requirement of division 3.2.3 but submits that there are no such disclosure requirements that could apply and hence paragraph (c) has no present operation. It submits that paragraph (c) would only have any operation if there were subsequent amendments to the Act which provided for compliance with a disclosure requirement by the agreement itself.
Consideration
This is an argument which it is not essential to resolve in order to answer the question referred by the Deputy Registrar and, for reasons which I will explain, I will not attempt to finally resolve it. It is worthwhile explaining the issues and why it is not appropriate to attempt to finally resolve them.
Both parties accepted that, at the point when the three documents were sent, total legal costs in the matter excluding disbursements were not “likely to exceed $1,500 (exclusive of GST)”. As a consequence the extensive disclosure requirements in s 269 would not apply at that point: see s 272(1)(a). On the other hand, the disclosure obligations would apply at the point when the legal practice became aware that the total legal costs were likely to exceed $1,500 exclusive of GST: see s 272(2).
If the requirement in s 300A(1)(c) only applied when the documents were first sent then paragraph (c) is satisfied because there was no obligation to make the disclosure at that point in time. On the other hand, if paragraph (c) requires compliance with the disclosure requirements subsequent to the initial agreement then there is a factual issue that needs to be determined as to whether or not there was non-compliance in a material respect with an applicable disclosure requirement. Having regard to the terms of the July documents, unless there was some further disclosure at the point when the $1,500 plus GST threshold was reached (of which there is presently no evidence), then at least some of the disclosure requirements in s 269 have not been satisfied.
The starting point for considering the interpretation of s 300A(1)(c) must be its text. It provides: “that the agreement does not comply in a material respect with any applicable disclosure requirements of division 3.2.3 (Costs disclosure)”. The most significant textual matter is that it refers to “the agreement” not complying with an applicable disclosure requirement. It does not refer more generally to there having been non-compliance with a disclosure requirement by the party seeking to enforce the agreement. That is a strong indicator that the paragraph only applies where there has been non-compliance with a disclosure requirement in or immediately relating to the agreement itself.
That interpretation is reinforced by the other provisions of the Act which contemplate that there may be an enforceable costs agreement even where there has been some failure to comply with the disclosure requirements in division 3.2.3 (which includes ss 269–278). Section 277 deals with the consequences of a failure to disclose. It does not provide that the agreement is unenforceable. Rather it requires the proceedings can only be brought against a client after costs have been assessed: s 277(2) and that the assessed amount may be “reduced by an amount considered by the Supreme Court to be proportionate to the seriousness of the failure to disclose”: s 277(4). It also permits an application to set aside the costs agreement under s 288: s 277(3). Where such an application is brought, the Supreme Court is not obliged to set aside the agreement if there has been a failure to make a disclosure required by division 3.2.3 but rather that is one of the matters that needs to be taken into account in determining whether the costs agreement is “fair and reasonable”: see ss 288(1), 288(3)(c). The provisions of s 288 in particular, tend against an interpretation of s 300A(1)(c) which rendered unenforceable any costs agreement where there had been a failure to make a required disclosure at any time.
The best argument for the interpretation advanced by the applicant was, in fact, raised as part of the respondent’s submissions, namely that, on the respondent’s interpretation, the paragraph has no present operation at all because there is no present disclosure requirement in division 3.2.3 that a costs agreement needs to comply with. The respondent’s submission was that paragraph (c) has no operation at all and it is only there in case at some unidentified time in the future the Act was amended so as to include a requirement to which it might apply. The difficulty with such a submission is that it is axiomatic that a court will strive to interpret each provision in a statute to give it some sensible operation and strain against an interpretation which leaves part of the statute no effect: Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at 381[71].
The legislative history of the Legal Profession Act might leave some room for the argument put by the respondent. That is because the Act, in the form that it was after the Legal Profession Amendment Act 2007, is based upon the 2nd edition of the model bill prepared by the Parliamentary Counsel’s Committee and published in August 2006. It is a bill designed to be implemented in largely uniform terms across Australia. Clause 3.4.45 of that model bill is one of the core uniform provisions and the terms of s 300A reflects the terms of clause 3.4.45. The model bill had to accommodate the range of jurisdictions and the possibility that in one or other of the jurisdictions, disclosures might be required to be, or statutorily authorised to be, made in costs agreements. It is possible that the drafting of clause 3.4.45 was in contemplation of such variations in disclosure requirements between jurisdictions and that the provision has been included in the Act notwithstanding that there are no such disclosure requirements in the Territory.
An alternative interpretation that would give the provision some effect would be to interpret the reference s 300A(1)(c) as picking up the disclosure obligation in s 274. Section 274 provides:
(1)If a costs agreement involves an uplift fee, the law practice must disclose to the client in writing, before entering the agreement—
(a)the uplift fee (or the basis for working out the uplift fee); and
(b)the reasons why the uplift fee is justified.
(2)The disclosure under subsection (1) is in addition to any information required to be disclosed to the client under section 269 (Disclosure of costs to client).
...
Although the disclosure is not required to be in the costs agreement, it is an obligation which is, unlike the other disclosure obligations in division 3.2.3, expressly tied to the entry into the costs agreement. Although stating that “the agreement does not comply” with the disclosure requirement in s 274 is not ideal drafting if that is what was intended to be caught by s 300A(1)(c), it might open to construe s 300A(1)(c) as applying where there is a specific disclosure obligation tied to the entry into a costs agreement and that has not been complied with. Adopting such an interpretation would mean that there would be at least one situation where paragraph (c) could apply and hence the most obvious reading of the text would be one consistent with giving the paragraph some present operation.
I think it is most likely that the apparent obscurity in the drafting will be clarified by some aspect of the multi-jurisdictional nature of the drafting process. However the submissions of the parties in the present case did not extend to a full examination of that process or of the legislation in the various jurisdictions that have adopted the model bill provisions. Such an examination would be necessary in order to discover whether the multi-jurisdictional drafting process can explain the wording of the paragraph. In those circumstances, given that it is not essential that I determine the third argument in order to answer the question posed by the Deputy Registrar, I will not attempt to do so.
Conclusion
I have found that the applicant’s first argument, namely that there was no valid costs agreement, is correct. Had there been a valid cost agreement I would have found that, in relation to professional fees beyond the $1,034 agreed fees, there was no relevant provision of the costs agreement that specified “the amount or a rate or other means of working out the amount, of the costs”.
Therefore the question that has been referred to me should be answered “No”.
In my view it is appropriate that I deal with the issue of costs of the reference rather than simply leaving the costs of the reference to be deal with by the Deputy Registrar. Section 302 of the Act deals with costs of the costs assessment. This reference formed part of that unfinished process. Section 302 provides that, unless the Supreme Court otherwise orders, the law practice must pay the costs of the assessment if either of the two conditions in s 302(2) are met, namely a reduction on assessment of the costs by 15% or more or the Court being satisfied of a failure to comply with division 3.2.3. I have not been required to finally determine either of these issues for the purposes of the question referred. However s 302(3) permits the Court to make an order for costs where the obligation to pay costs in s 302(2) has not been triggered. In my view, having regard to the outcome of the reference, costs of the reference should follow the event and the respondent should pay the costs of the reference. However if either party wishes to make submissions on the costs issue I will permit them to do so.
The orders that I will make are:
1. The question referred by the Deputy Registrar under rule 6255 be answered “No”.
2. Unless any party notifies my associate by email within seven days that it wishes to be heard in relation to costs, the respondent is to pay the applicant’s costs of the referral of the question under rule 6255.
I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of Master Mossop.
Associate:
Date: 27 September 2013
Counsel for the applicant: Mr R Travers
Solicitors for the applicant: Phelps Reid Lawyers
Counsel for the respondent: Mr C Erskine SC
Solicitors for the respondent: Goodman Law
Date of hearing: 23 September 2013
Date of judgment: 27 September 2013
1
1
1