Mackie & Staff Pty Ltd v Khor & Burr
[2013] VSC 696
•13 December 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 3685 of 2013
| MACKIE & STAFF PTY LTD | Appellant |
| v | |
| KHOR & BURR | Respondent |
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JUDGE: | McMillan J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21 October 2013 | |
DATE OF JUDGMENT: | 13 December 2013 | |
CASE MAY BE CITED AS: | Mackie & Staff Pty Ltd v Khor & Burr | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 696 | |
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COSTS — Appeal from Associate Judge — Appellant sought a review of legal costs — Application held to be out of time — Whether a bill without a disclosure statement is a bill within the meaning of the Legal Profession Act 2004 — Whether there are multiple opportunities for a review of costs under the Legal Profession Act 2004 —Meaning of ‘final bill’ — Appeal denied — Legal Profession Act 2004 ss 3.4.22, 3.4.34, 3.4.35, 3.4.37, 3.4.38
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J Twigg | Vadarlis & Associates |
| For the Respondent | Mr M Bevan John | Khor & Burr |
HER HONOUR:
Introduction and Background
This is an appeal from the decision and orders of Wood AsJ on 2 September 2013 in relation to a costs review under s 3.4.38 of the Legal Profession Act 2004 (‘the LPA’).
The appellant is a construction company. It is common ground that the appellant is an unsophisticated client under the LPA. The respondent is a law firm.
The respondent acted for and rendered accounts to the appellant between 2006 and 2008. The present dispute concerns five of those accounts, the last of which was dated 30 June 2008. Those five accounts amounted in total to $503 533.76. Nearly $426 895.73 of that sum remains unpaid.
It was not disputed that at the time the relevant accounts were rendered, they were not compliant with the LPA because they did not include the statement of rights required under ss 3.4.33 and 3.4.35. This was not realised until much later.
In late 2012 the respondent commenced proceedings in the County Court to recover the unpaid sum. Those proceedings were withdrawn after the appellant’s solicitors informed the respondent that its action for recovery had been commenced in breach of s 3.4.33 of the LPA.
Under cover of letter dated 7 February 2013, the respondent resent the accounts to the appellant with individual disclosure statements for each of the accounts. The appellant received the resent accounts on 8 February 2013.
By summons dated 18 July 2013, the appellant applied to the Costs Court for review of its legal costs pursuant to s 3.4.38(1) of the LPA. The appellant seeks review of all legal costs under the respondent’s retainer, most of which have already been paid. On 6 August 2013, the respondent served a notice of objection on the basis of the review being out of time under s 3.4.38(5).
On 2 September 2013, Wood AsJ heard and upheld the respondent’s objection. His Honour held that the appellant’s application for review was out of time pursuant to s 3.4.38(5). Wood AsJ concluded that the date of the final bill for the purposes of the costs review provisions of the LPA was 30 June 2008, and that time began to run on that date. Finally, his Honour held that, in order to seek review of costs, the appellant requires an extension of time pursuant to s 3.4.38(6).
By notice of appeal dated 16 September 2013, the appellant appeals from the decision of Wood AsJ. The appellant prefers to argue that its summons comes within the time limit for review under s 3.4.38(5), rather than to seek an extension of time under s 3.4.38(6).
Grounds of Appeal
In its notice of appeal, the appellant relies on the following grounds of appeal:
1.Wood AsJ erred in law by concluding that time began to run from 30 June 2008 and that the 30 June 2008 bill was the final bill for the purposes of the review provisions because:
(a)a bill of costs for the purposes of the LPA must include notification of rights under s 3.4.35 of the LPA; and
(b)the last bill of costs, containing notification of legal rights, was served on 7 February 2013; and
(c)the rights of review under s 3.4.38 of the LPA did not commence to run until 7 February 2013 and will expire on 7 February 2014.
2.Wood AsJ erred in law by finding that the final bill of costs was given on 30 June 2008, because:
(a)the bill of costs rendered on that date, did not include notification of rights under s 3.4.35 of the LPA and as no bill of costs had been given it could not be a request for payment; and
(b)a request for payment does not result in time beginning to run for the purposes of s 3.4.38(5)(a), until after a bill of costs served in compliance with s 3.4.35 has been served or given, after which a request for payment may be made following delivery of a bill of costs.
The notice of appeal, therefore, discloses two grounds of appeal. They are, first, that Wood AsJ erred in holding that time began to run on 30 June 2008, and, secondly, that Wood AsJ erred in holding that the bill dated 30 June 2008 was the final bill of costs for the purposes of the costs review provisions in the LPA.
The essential question of the appeal is whether the final bill is the 30 June 2008 bill or the 7 February 2013 bill. This requires the determination of the following questions:
(a)Did time begin to run on the giving of the 30 June 2008 bill?
(b)If so, are there multiple opportunities for review of costs under s 3.4.38, or only a single 12 month period in which to seek review?
(c)If not, was the final bill for the purposes of the LPA the bill dated 30 June 2008 or the bill dated 7 February 2013?
Relevant Legislation
The purposes of pt 3.4 of the LPA, entitled ‘Costs Disclosure and Review’, are set out in s 3.4.1:
The purposes of this Part are-
(a)to provide for law practices to make disclosures to clients regarding legal costs;
(b)to regulate the making of costs agreements in respect of legal services, including conditional costs agreements;
(c)to regulate the billing of costs for legal services;
(d)to provide a mechanism for the review of legal costs and the setting aside of certain costs agreements.
The relevant sections of pt 3.4 div 6, entitled ‘Billing’, provide:
3.4.33 Legal costs cannot be recovered unless bill has been served
(1)A law practice must not commence legal proceedings to recover legal costs from a person until at least 65 days after the law practice has given a bill to the person in accordance with sections 3.4.34 and 3.4.35.
(2)A court of competent jurisdiction may make an order authorising a law practice to commence legal proceedings against a person sooner if satisfied that—
(a)the law practice has given a bill to the person in accordance with sections 3.4.34 and 3.4.35; and
(b)the person is about to leave this jurisdiction.
(3)A court or tribunal before which any proceedings are brought in contravention of subsection (1) must stay those proceedings on the application of a party, or on its own initiative.
…
3.4.34 Bills
(1) A bill may be in the form of a lump sum bill or an itemised bill.
…
3.4.35 Notification of client’s rights
(1)A bill must include or be accompanied by a written statement setting out—
(a)the following avenues that are open to the client in the event of a dispute in relation to legal costs—
(i)costs review under Division 7;
(ii)the setting aside of a costs agreement under section 3.4.32;
(iii)making a complaint under Chapter 4; and
(b)any time limits that apply to the taking of any action referred to in paragraph (a).
(2)Subsection (1) does not apply in relation to a sophisticated client.
…
3.4.37 Interim bills
(1)A law practice may give a person an interim bill covering part only of the legal services the law practice was retained to provide.
(2)Legal costs that are the subject of an interim bill may be reviewed under Division 7, either at the time of the interim bill or at the time of the final bill, whether or not the interim bill has previously been reviewed or paid.
Division 7 of that Part, entitled ‘Costs Review by Costs Court’, further provides:
3.4.38 Application by clients or third party payers for costs review
(1)A client may apply to the Costs Court for a review of the whole or any part of legal costs.
…
(3)An application for a costs review may be made even if the legal costs have been wholly or partly paid.
…
(5)An application by a client or third party payer for a costs review under this section must be made within 12 months after—
(a)the bill was given or the request for payment was made to the client or third party payer; or
(b)the costs were paid if neither a bill was given nor a request was made.
(6)However, an application that is made out of time, otherwise than by—
(a)a sophisticated client; or
(b)a third party payer who would be a sophisticated client if the third party payer were a client of the law practice concerned—
may be dealt with by the Costs Court if the Supreme Court constituted by a Judge of the Court within the meaning of the Supreme Court Act 1986, on referral by a Costs Judge or the client or third party payer who made the application for review, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for review to be dealt with after the 12 month period.
The Appellant’s Submissions
The appellant’s relevant submissions are summarised below:
(a)A law practice may not commence proceedings to recover legal costs until at least 65 days after a bill complying with ss 3.4.34 and 3.4.35 is given to the client. A bill of costs that is not compliant with ss 3.4.33, 3.4.34 and 3.4.35 is not a ‘bill of costs’ for the purposes of the LPA and cannot be a final bill. Consequently, the 30 June 2008 bill cannot be the final bill.
(b)Treating the 7 February 2013 bills as bills upon which recovery proceedings may be commenced, but not as bills of costs for the purposes of costs review, is contrary to the plain language of the LPA. Rather, the 7 February 2013 was a bill of costs for the purposes of s 3.4.38(5), and was the final bill of costs. The 7 February 2013 bill comprised bills bearing dates up to 30 June 2008, however the bill was given to the appellant on 7 February 2013, and that is when the 12 month review period began.
(c)By requiring a bill to comply with s 3.4.35 before recovery proceedings may be commenced (and therefore requiring that a client be notified of its right to seek costs review), s 3.4.33 is itself a mechanism for review of costs.
(d)Parliament did not intend for practitioners to be able to avoid the mechanism for review in s 3.4.33 by first providing a bill that does not comply with s 3.4.35 and then providing a second bill after 12 months that does comply. The result of a solicitor being able to avoid giving notice to a client of rights until those rights no longer exist is absurd. Section 3.4.33 requires solicitors to wait 65 days after giving a compliant bill before commencing recovery proceedings. If the compliant bill only notifies the clients of expired rights, it is a nonsense that the solicitor be required to wait 65 days, and parliament cannot have intended this nonsensical result.
(e)It would also be absurd if solicitors could avoid the client’s right to review in s 3.4.38(5) by first making a request for payment without disclosing the client’s rights to review, and then 12 months later giving a bill of costs with disclosure.
(f)There are multiple rights/opportunities for review. Construing s 3.4.38(5) as providing a single period of review conflicts with s 3.4.37 and leads to incongruity. Rather, the period for review of costs commences from either the giving of a bill, a request for payment, or when payment was made. Section 3.4.38(5)(a) applies to any bill given by a legal practice; interim, final, itemised or lump sum. Accordingly, there are potentially multiple opportunities for review, and the last opportunity commences when the final bill is given.
(g)Viscariello v Oakley Thompson & Co Pty Ltd (‘Viscariello’)[1] and Ipex ITG Ltd Pty v McGarvie (‘Ipex’)[2] properly construe s 3.4.35 but did not apply to the hearing of the objection on 2 September 2013.
[1][2012] VSC 351 (21 August 2012).
[2][2011] VSC 675 (9 November 2011).
The Respondent’s Submissions
The respondent relied on its Outline of Argument dated 2 September 2013, and made additional submissions, summarised below:
(a)The appellant was aware of its right to seek costs review, as the right was disclosed in the Disclosure Statement provided to the appellant at the start of the retainer.
(b)The respondent resent bills to the appellant in order to comply with the LPA, not to circumvent it. The respondent’s sole purpose in doing so was to comply with s 3.4.33, and then recommence recovery proceedings.
(c)Even without the requisite disclosure, a bill is still a bill of costs for the purposes of the LPA, and s 3.4.38(5) in particular, and time begins to run from when such a bill is given. In the event the original accounts are not held to be ‘bills’, they were at least requests for payment.
(d)Time begins to run when a request is made for payment. The request need not be accompanied by a bill with the requisite disclosure. Time also begins to run when payment is made of the legal costs. Accordingly, there need not be a bill of costs in order for there to be a review of legal costs, or for the 12 month period to begin and expire.
(e)The LPA contemplates loss of the right to seek review of costs, and provides a mechanism for extension of time. It would be absurd to construe the LPA so that the right to seek review may have expired after costs have simply been paid, or after a request for payment has been made, but not after a bill without the requisite disclosure has been given.
(f)In this case, the right to seek review expired 12 months after 30 June 2008, the date of the last bill, and the resending of the bills in February 2013 had no effect on the appellant’s right to seek review. There is no issue of a final bill being sent in February 2013, thereby extending the right to review back in time. The final bill was dated 30 June 2008.
(g)The right of recovery of legal costs is a separate matter from the right of review.
(h)The only avenue open to the appellants for costs review is to apply to the Court for a review out of time under s 3.4.38(6).
Relevant Principles
The respondent referred to four authorities in its objection to the appellant’s summons. The appellant has not sought to rely on any other authorities on the LPA.
In Viscariello, the law firm rendered a final bill dated 8 December 2009. On 7 December 2010, the firm served recovery proceedings on Mr Viscariello, who had guaranteed payment of legal fees owed to the firm by the client. On 1 May 2012, Mr Viscariello filed a summons seeking costs review. The summons was dismissed as being out of time. The Associate Judge refused to extend the time for application for costs review because Mr Viscariello was a solicitor himself and, therefore, a sophisticated client. Mr Viscariello appealed, and argued that the 12 month review period had not started to run, because the legislative requirements had not been met.
Mr Viscariello contended that, under s 3.4.38(5) of the LPA, a bill must be given and a request made before time starts to run. In support of this argument Mr Viscariello relied upon s 3.4.33, which prohibits a law practice from commencing proceedings to recover costs until at least 65 days after the giving of a compliant bill.
Relevantly, Ferguson J held that:
I do not accept Mr Viscariello’s contention that because the entitlement to recover costs is dependant upon a bill with any relevant disclosures being given, it must follow that the proper construction of s 3.4.38(5)(a) is that a bill must always be given before time starts to run for seeking a review of the costs. The right to recovery and the right to review are separate matters. Whether the time period which must elapse before bringing proceedings has passed does not affect whether the time limit for seeking a review has expired. Moreover, whilst the failure to make disclosure as to the avenues open in the event of dispute about the costs has certain consequences (including that the law practice must not commence recovery proceedings), it does not prevent time from running for…seeking a costs review. Similarly, whether time has or has not commenced to run for requesting an itemised bill does not affect the time limit for seeking a costs review.[3]
[3][2012] VSC 351 (21 August 2012) [12] (citation omitted).
Ferguson J also held that time begins to run whether a request for payment is made, or a bill is given.[4] Her Honour said:
What is important for s 3.4.38(5)(a) is that it is known that the solicitors are seeking their costs, either because they have sent a bill or because they have otherwise asked for payment. There is then 12 months in which to seek a review of the costs.[5]
[4]Ibid [13], [21].
[5]Ibid [13].
The law practice need not provide a bill and make a request for payment in order for time to start running. When either event occurs, time begins to run. Her Honour explained that the purpose and history of the legislation supported that construction.[6] Of particular relevance was the effect of the precursor legislation, that one of the stated purposes of the LPA was to provide a mechanism for the review of costs, and that s 3.4.38(6) provided for a potential extension of time for unsophisticated clients in the event of the 12 month review period having expired. In the circumstances, there are three events individually capable of causing time to start running.
[6]Ibid [14].
The appellant sought to distinguish Viscariello on the basis that, in that case, the client was a sophisticated client, so disclosure under s 3.4.35 was not required in order for the solicitor to commence recovery proceedings. In my view, the findings of Ferguson J are of general application. Whether or not the client is a sophisticated client, time will begin to run under s 3.4.38(5) even if the solicitor has not made disclosure of the avenues open to the client.
In Viscariello, there was no issue as to bills that had been previously sent, or the meaning of ‘final bill’. More than 12 months had passed since the last bill was given to Mr Viscariello. At issue was whether the 12 month period only started to run once Mr Viscariello had been requested to pay the solicitor’s costs and had been given a bill compliant with s 3.4.33. Ferguson J therefore did not have to consider final bills or the question whether there are multiple opportunities for review.
In Ipex, Wood AsJ, although not required to decide the point, suggested that ‘bill’ in s 3.4.38(5)(a) includes a lump sum bill or an itemised bill and, consequently, time starts to run from the date a lump sum bill is given.[7] This is so even if the client later requests an itemised bill. In such a case, time runs out 12 months after the giving of the lump sum bill. As the client’s application for review of costs was within time in any event, Wood AsJ did not need to determine whether time ran from the date of the lump sum bill or the itemised bill.
[7][2011] VSC 675 (9 November 2011) [7].
In Challen v Golder Associates Pty Ltd (‘Challen’),[8] the Court of Appeal in Queensland, comprising McMurdo P, Fraser JA and Mullins J, considered the Queensland equivalent of s 3.4.37 of the LPA. The appellant solicitor argued that, apart from the last three bills it had issued to the respondent client, the client was out of time to seek review of the solicitor’s bills. The solicitor argued that each of the bills leading up to the last three was itself a final bill, and not an interim bill. The Court of Appeal held that the Queensland equivalent of s 3.4.37(2) provides an additional time period for the assessment of an interim bill; within 12 months after the final bill is given.[9] The final bill is the last bill rendered for the legal services the solicitor has been retained to provide.[10] In determining what the final bill is, the relevance of the costs agreement is that it specifies the extent of the retainer.[11] The final bill is not necessarily the last bill in time, as the last bill in time might relate to legal services not the subject of the retainer. In many cases, however, the final bill will be the last bill in time.
[8][2012] QCA 307 (9 November 2012).
[9]Ibid [43].
[10]Ibid [44].
[11]Ibid.
The Court of Appeal upheld the trial judge’s decision that the last bills in time, two bills issued on 9 December 2010, were the final bills under the retainer, and that the previous bills were interim bills. This meant the additional period of review applied to those interim bills. The client could apply for review of the interim bills and the final bills within 12 months of the giving of the final bills.
By coincidence, on 9 November 2012, the date that Challen was delivered, Garde J handed down his decision in Collection Point Pty Ltd v Cornwalls Lawyers Pty Ltd,[12] and agreed with the decision at first instance in Challen, rather than following the Victorian case of Dromana Estate Ltd v Wilmoth Field Warne.[13] Garde J helpfully summarised the history of the relevant legislation.[14] His Honour held that s 3.4.37(2) was a specific provision that overrode the general provision of s 3.4.38(5).[15] Accordingly, interim bills can be reviewed within 12 months of the final bill being given.[16]
[12][2012] VSC 492 (9 November 2012).
[13][2010] VSC 308 (7 July 2010).
[14][2012] VSC 492 (9 November 2012), [33]—[57].
[15]Ibid [84]—[87].
[16]Ibid [101].
Garde J also held that s 3.4.37 and pt 3.4 of the LPA generally:
are examples of consumer protection legislation, an established class of beneficial legislation, ambiguities in which are to be construed liberally in favour of the person to be benefited.[17]
[17]Ibid [90], [100](d) (citations omitted).
With these principles in mind, I now turn to the three questions that must be determined in this appeal.
Did Time Start to Run on 30 June 2008?
The appellant was sent a bill dated 30 June 2008. There is no dispute as to the fact that bills were given in 2007 and 2008. Counsel for the appellant referred to these as ‘bills’, but then later argued that they are not bills of costs for the purposes of the LPA.
The 30 June 2008 bill set out the work completed between 27 November 2007 and 4 April 2008, and the time spent on each item of work. The bill then set out the total time spent, the amount charged per hour, and the total amount of the bill, which was $4177.83. The bill stated at the bottom that ‘payment is due on receipt of this bill’.
The descriptions of each item of work undertaken are brief, and it is not stated who completed the work. Nonetheless, in my view, the 30 June 2008 is a ‘bill’ for the purposes of s 3.4.38(5)(a). It was in writing, it set out the work performed by the respondent and demanded payment. I do not accept the appellant’s argument that it cannot be a bill for the purposes of ss 3.4.37 or 3.4.38 because it did not comply with s 3.4.35.
‘Bill’ is not defined in the LPA. Section 3.4.2 contains the definitions for pt 3.4. There are definitions for ‘itemised bill’, ‘lump sum bill’, but not ‘bill’. The appellant argued that a bill is only a ‘bill’ if it complies with ss 3.4.34 and 3.4.35. If that were the meaning of ‘bill’, it would be unnecessary for s 3.4.33 to use the italicised words in ‘given a bill to the person in accordance with sections 3.4.34 and 3.4.35’. While s 3.4.33 specifies that the bill must comply with ss 3.4.34 and 3.4.35 in order for the solicitor to be able to commence recovery proceedings, s 3.4.38(5)(a) does not specify that the bill must comply with ss 3.4.34 and 3.4.35 in order for time to start running. Thus, a bill may not comply with ss 3.4.34 and 3.4.35 but nevertheless be a ‘bill’ within the meaning of s 34.38(5)(a).
I note that, in Western Australia, s 295(6) of the Legal Profession Act 2008 (WA) requires that a bill be given ‘in accordance with Division 7’ (the division that requires a practitioner to include the disclosure statement) in order to be a ‘bill’ for which a review of costs may be sought. Western Australia is the only jurisdiction expressly to include this requirement, and there was no debate in either the Legislative Assembly or Council on this inclusion. The effect of this inclusion has not been considered in the courts of Western Australia. However, on its face, it appears to demonstrate that the word ‘bill’ in that Act does not inherently incorporate the requirements of Division 7, or at least that the drafters of that Act were of the opinion that a further inclusion was necessary to incorporate those requirements.
Even if the 30 June 2008 bill were not a bill for the purposes of s 3.4.38(5)(a), it certainly amounts to a request for payment, as it made it known to the appellant that the respondent was seeking its legal costs.
Accordingly, time began to run from the giving of the 30 June 2008 bill. This is so even if the bill did not include a disclosure statement. In accordance with Viscariello, time begins to run even if the solicitor cannot commence recovery proceedings. The right to seek review is separate from the right to recover.
I uphold the finding of Wood AsJ that time began to run from the giving of the bill dated 30 June 2008, and expired 12 months thereafter.
Are There Multiple Periods for Review?
The appellant contends that there are multiple opportunities for review; that the 12 month period in which to seek review applies to any bill that is given to the client or any request for payment that is made of the client, even though such bill or request relates to legal work the subject of a previous bill or request.
Counsel for the appellant argued that, if a solicitor makes a request for payment, times starts to run, but that, if the solicitor subsequently sends a bill in relation to the same legal work, the client’s rights are re-initiated. The appellant did not cite any authority for this construction of s 3.4.38(5). If the appellant is correct, the 7 February 2013 bill sets the clock running anew, whether or not it is merely a resent bill.
The issue is whether there are multiple rights to review costs such that a new 12 month period began when the 7 February 2013 bill was given to the appellant.
In Viscariello, Ferguson J considered the legislative history of s 3.4.38(5).[18] The LPA was amended by the Legal Profession Amendment Act 2007 (‘the 2007 Act’). Before the amendment, s 3.4.38 read as follows:
[18][2012] VSC 351 (21 August 2012) [15].
3.4.38 Application by clients for costs review
(1)A client may apply to the Taxing Master for a review of the whole or any part of a bill of costs.
(2)An application for a costs review may be made even if the legal costs have been wholly or partly paid.
(3)If any legal costs have been paid without a bill, the client may nevertheless apply for a costs review and, for that purpose, the request for payment is taken to be a bill.
(4)An application under this section must be made within 60 days after the bill was given or the request was made or the costs were paid (whichever is earlier or earliest).
(5)However, the Taxing Master must deal with an application made out of time, unless the Taxing Master considers that the law practice has established that to do so would, in all the circumstances, cause unfair prejudice to the law practice.
Section 56 of the Legal Profession Amendment Act 2007 increased the time limit for applying for review from 60 days to 12 months, and removed the words ‘(whichever is earlier or earliest)’. The Explanatory Memorandum to that Act states that s 56:
substitutes section 3.4.38 of the Principal Act in accordance Act with amendments to the national model provisions to set out how and when third party payers may apply for costs reviews. The amendment also increases the time for clients and third party payers to apply for a costs review from 60 days to 12 months. Out-of-time applications may be made with leave of the Supreme Court.[19]
[19]Explanatory Memorandum, Legal Profession Amendment Bill 2007, cl 56, 18.
The second reading speech included the following:
Disputes about the bill for legal costs are a common area of contention between consumers and legal practitioners. It is an issue that can be fraught with miscommunication and misunderstandings.
For this reason it is important to ensure that consumers are properly informed about the costs of using a lawyer, and that there are appropriate independent avenues for resolving disputes between clients and legal practitioners about costs. The bill includes a significant amendment to the procedure for having a bill of costs reviewed by the taxing master in the Supreme Court. This includes extending the time for a client to apply for a costs review from 60 days to 12 months, with a provision allowing out-of-time applications to be considered by the Supreme Court in special circumstances.[20]
[20]Victoria, Parliamentary Debates, Legislative Assembly, 28 February 2007, 561 (Rob Hulls, Attorney-General) (emphasis added).
Debate ensued and concerns were raised over the 12 month period being too long. The leader of the Nationals (in opposition) said:
The extension to 12 months of the time limit for a cost review application before a taxing master falls into a similar category, and we believe it also strikes the right balance. I do not believe these matters will result in the stringing out of cost applications and arguments.
It is important that we put some stringent time limits into this legislation to shorten the time in which arguments over costs happen and resolve matters more quickly and more appropriately in the interests of all parties.[21]
[21]Victoria, Parliamentary Debates, Legislative Assembly, 19 April 2007, 1103 (Tony Lupton).
The balance to be struck between providing consumer protection and avoiding consumers being able to delay paying their legal costs was also debated in the Legislative Council in the second reading speech.[22]
[22]Victoria, Parliamentary Debates, Legislative Council, 1 May 2007, 980 (Gordon Rich-Phillips); 984 (Jenny Mikakos); and 985 (Edward O’Donohue).
After considering the Explanatory Memorandum and second reading speech (albeit a different section of the second reading speech), Ferguson J held, in relation to s 3.4.38(5), that:
There is no suggestion in the legislation itself, the Explanatory Memorandum or the second reading speech that there was any intention to depart from the way that the earlier legislation had operated in requiring only one of three events to occur to start the time running for seeking a costs review.[23]
[23] Viscariello [2012] VSC 351 (21 August 2012) [19].
This is not, however, dispositive of the question whether there are multiple periods of review.
The words ‘(whichever is earlier or earliest)’ in the former version of s 3.4.38(4) had the effect that there was a single period in which to seek review. That period was 60 days. Time started to run on the occurrence of one of three events, whichever came first. Time did not restart if one of the other specified events occurred later.
Apart from the simple fact of deletion of the words ‘(whichever is earlier or earliest)’, there is nothing in the new legislation itself, the Explanatory Memorandum or the second reading speech to suggest an intended departure from the earlier legislation’s provision of a single review period.
In saying this, I am conscious of the dangers of interpreting legislation by reference to legislative silence. In Chisom v Roemer, Scalia J in dissent criticised the reliance by the majority of the United States Supreme Court on the fact that Congress had not indicated that it intended to make any significant change in altering the Voting Rights Act:
There are two things wrong with this. First is the notion that Congress cannot be credited with having achieved anything of major importance by simply saying it, in ordinary language, in the text of a statute, ‘without comment’ in the legislative history. As the Court colorfully puts it, if the dog of legislative history has not barked nothing of great significance can have transpired. Apart from the questionable wisdom of assuming that dogs will bark when something important is happening, see 1 T. Livius, The History of Rome 411–413 (1892) (D. Spillan transl.), we have forcefully and explicitly rejected the Conan Doyle approach to statutory construction in the past. See Harrison v. PPG Industries, Inc., 446 U.S. 578, 592, 100 S.Ct. 1889, 1897, 64 L.Ed.2d 525 (1980) (‘In ascertaining the meaning of a statute, a court cannot, in the manner of Sherlock Holmes, pursue the theory of the dog that did not bark’). We are here to apply the statute, not legislative history, and certainly not the absence of legislative history. Statutes are the law though sleeping dogs lie.[24]
[24]501 US 380, 406 (1991).
However, in this instance, opening multiple periods of review would substantively change the costs review mechanism in an unprecedented fashion. The legislature consciously turned their mind to the extension of the length of the review period, and debated the appropriateness of that extension. The opening of multiple periods of review is a change of perhaps even greater magnitude. The proposition that such a change was intended to be effected without any indication by the parliament that this was the case, seems to me to be difficult to accept.
If there were multiple opportunities for review in respect of the same legal work, a new 12 month period would begin every time a law firm sent a payment reminder to its client, because such reminder is a request for payment. That result would not accord with the purposes of a time limit for review or with the structure of s 3.4.38, which provides for a time limit and then for extensions of time under certain conditions.
In my view, the present s 3.4.38(5) is in effect to be read as though the words ‘(whichever is earlier or earliest)’ are still present. Section 3.4.38(5) therefore provides for a 12 month period to begin on the occurrence of any of three events, whichever is earlier or earliest. There are not multiple opportunities for review in respect of the same legal work.
This conclusion is supported by the suggestion in Ipex that time begins to run from the giving of a lump sum bill, and does not refresh when an itemised bill is later given.
In coming to this conclusion, I have had regard to the appellant’s submission that for s 3.4.37(2) to have any effect there must be multiple rights to review. In my view, the appellant has overstated the importance of s 3.4.37(2) in the construction of s 3.4.38(5). Section 3.4.37(2) does not change the structure of s 3.4.38(5), which provides for a single period of review to commence on the earliest of three events. Section 3.4.37(2) provides an additional period for review of interim bills; interim bills may also be reviewed in the period in which the final bill may be reviewed. The time in which the final bill may be reviewed is determined by s 3.4.38(5).[25] In one sense, the fact that the legislature explicitly provided for a second review period on the issuing of a final bill suggests that the ordinary operation of s 3.4.38(5) would otherwise deny that. If the appellant’s submission on this point were correct, s 3.4.37(2) would have very little work to do.
[25]This may, in certain circumstances, be less than 12 months from the giving of the final bill, such as when a request for payment is made before the final bill is given, when both request and bill concern the same legal work.
Accordingly, I reject the appellant’s submissions that there are multiple opportunities for review. There is a single period in which to seek review of particular legal costs. In respect of interim bills, this is subject to the additional time provided in s 3.4.37(2).
Was the 7 February 2013 Bill a Final Bill?
As time began to run from the giving of the 30 June 2008 bill, the appellant was out of time to seek review on 18 July 2013, unless the 7 February 2013 bill is the ‘final bill’ for the purposes of ss 3.4.37(2) and 3.4.38(5)(a). The 7 February 2013 bill is certainly a bill, but the issue is whether it is a final bill.
Wood AsJ held that the 30 June 2008 bill was the final bill. The appellant contends that a bill that does not comply with ss 3.4.34 and 3.4.35 is not a bill of costs for the purposes of the LPA and cannot be a final bill for the purposes of s 3.4.35.
In my view, this submission should be rejected. ‘Final bill’ merely means the last bill in time for work done pursuant to the retainer. It does not need to be an enforceable bill. As the respondent submitted, the right of review in s 3.4.38 is a right of review of legal costs, not a right of review of a bill of costs in respect of which recovery proceedings may be commenced. Legal costs are defined in s 1.2.1(1) of the LPA as follows:
legal costs means 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 including disbursements but not including interest…[26]
[26](Emphasis added).
As ‘legal costs’ includes costs that the client ‘may become liable to pay’, the right to seek review in s 3.4.38(1) applies to unenforceable bills. This is a clear indication that the right to seek review is not dependent on the enforceability of a bill. I find, therefore, that whether a bill is a final bill does not depend on the enforceability of the bill.
In the present case, the final bill is the last bill in time that covers the last work done pursuant to the retainer, for which work the client is to be billed. I add ‘for which work the client is to be billed’ because there may be further legal work performed pursuant to the retainer but the solicitor may have decided not to bill the client for the later work. Here, the final work done under the retainer for which the appellant was billed was set out in the 30 June 2008 bill.
The appellant contends that the 7 February 2013 bill was the final bill for the purposes of s 3.4.37(2) and s 3.4.38(5). If the appellant is correct, then it has 12 months starting from the giving of the 7 February 2013 bill in which to seek review of that bill and all interim bills pertaining to the respondent’s retainer.
The 7 February 2013 bill does not bill the appellant for any work under the retainer for which the appellant had not already been billed. It was simply a resent bill, containing earlier bills from 2007 and 2008, the last of which was dated 30 June 2008.[27] The only difference between the 30 June 2008 and 7 February 2013 bills is that 65 days after being sent, the 7 February 2013 bill was enforceable, whereas the 30 June 2008 bill is not enforceable, and has never been enforceable.
[27]Counsel for the appellant referred to the 7 February 2013 bills as being resent bills, and being photocopies of bills previously sent.
Section 3.4.33 discriminates between the 7 February 2013 and the 30 June 2008 bills. It renders the former enforceable (after 65 days) and the latter unenforceable.
Sections 3.4.37(2) and 3.4.38(5)(a) do not discriminate on the basis of enforceability. The availability of a costs review and the time limit in respect of such a review do not depend on enforceability of the bill. The mere fact that the 7 February 2013 bill is enforceable does not make it the final bill or make the 30 June 2008 bill an interim bill. In order to be a final bill the 7 February 2013 would need to bill the appellant for further work done under the respondent’s retainer that was not billed in the 30 June 2008 bill.
The appellant submitted that treating the 7 February 2013 bills as bills upon which recovery proceedings may be commenced, but not as bills of costs for the purposes of costs review, is contrary to the plain language of the LPA. I do not accept the appellant’s argument that, if the 7 February 2013 is a bill for the purposes of recovery proceedings, it must also be a bill for the purposes of costs review. As has been said above, Viscariello is authority for the principle that time begins to run for costs review even if the solicitor cannot commence recovery proceedings, and that the right to recover and the right to review are separate rights.
The conditions that a bill must meet in order to be a bill for the purposes of recovery on the one hand, and a bill for the purposes of review on the other, are different. In order for the 7 February 2013 bill to be a bill for the purposes of recovery, it has to comply with s 3.4.34 and s 3.4.35. Whether the 7 February 2013 bill complies with ss 3.4.34 and 3.4.35 will be considered if and when the respondent brings recovery proceedings. In order for the 7 February 2013 bill to be a bill for the purposes of review, it has to be a final bill, or in other words, it has to bill the appellant for work done under the retainer that has not previously been billed. The 7 February 2013 bill does not bill the appellant for work done under the retainer that has not previously been billed, so it is not a bill for the purposes of review.
In my view, the 30 June 2008 bill is the final bill for the purposes of ss 3.4.37(2) and 3.4.38(5)(a). The time in which the appellant could seek review of legal costs expired 12 months after the giving of the 30 June 2008 bill.
I note that this appeal does not determine whether the 7 February 2013 bill was a bill that complied with s 3.4.33. If and when the respondent recommences recovery proceedings, a Court considering whether the 7 February 2013 bill complies with s 3.4.33 may need to consider whether a bill that notifies the client of an expired right to review meets the requirements of s 3.4.35(1).
Conclusion
I do not accept the appellant’s submissions that ss 3.4.33 and 3.4.35 themselves amount to a mechanism for review of costs. In my view, the only mechanism for review of costs is in s 3.4.38, in div 7 entitled ‘Costs Review by Costs Court’, the time limit of which may be affected by s 3.4.37(2). Sections 3.4.33 and 3.4.35 are in div 6 entitled ‘Billing’, and they deal with the requirements of bills in the context of recovery proceedings.
The appellant was out of time to take advantage of the review mechanism in s 3.4.38(1). The only avenue now open to the appellant to seek review of legal costs is to apply for review out of time under s 3.4.38(6).
Before me, counsel for the appellant stated that it was critical that they were seeking to establish they were in time, rather than applying for an extension of time, because they were seeking review of all costs, paid and unpaid. In my view, the 30 June 2008 bill was the final bill in this case. If the appellant is successful in obtaining an extension of time in which to review the 30 June 2008 bill, it will also be able to review the interim bills.
I make no findings as to whether the respondent’s intention in this case was to deliberately avoid the operation of the LPA and its mechanism for a review of the bills, as submitted by the appellant. Most likely, by oversight the bills up to and including the 30 June 2008 bill did not comply with the LPA, and upon realising this, the respondent sought to remedy the defect so that it could recommence legal proceedings to recover the outstanding legal fees. The respondent’s submitted that its singular purpose in resending the bills on 7 February 2013 was to meet the requirements of s 3.4.33 in order to recommence recovery proceedings.
I do accept, however, that less scrupulous legal practitioners might deliberately employ the tactical legerdemain of first sending non-compliant bills and then sending compliant bills 12 months later, after the period for review has expired. Such deliberate practice may have ramifications for those solicitors, including findings of unsatisfactory or unprofessional conduct under the LPA.
I do not accept the appellant’s submission that the result that a solicitor may commence recovery proceedings without having notified the client of its right to seek review while that right existed is absurd. In rejecting the submission, I take into account the following two features of the LPA:
(a)First, under s 3.4.9(j) of the LPA, in the initial costs disclosure statement the solicitor must disclose to the client its rights to seek costs review. Under s 3.4.17 of the LPA, if the solicitor fails to comply with s 3.4.9(j), it cannot recover costs unless the costs have been reviewed under div 7. Consequently, in order for the solicitor to recover costs without a costs review, the client must have been advised at the beginning of the retainer of its right to seek review.
(b)Secondly, if the client were nevertheless unaware of its right to seek review during the 12 months when review was available, and the solicitor failed to notify the client of its right to seek review during that period, the client may apply for review out of time under s 3.4.38(6).
The circumstance that a client was unaware of their right to seek review until after the review period expired is a circumstance that should be considered by the Court hearing an application under s 3.4.38(6). Where that circumstance is due to the deliberate practices of the solicitor, in my view, it should be given even more weight. As well, another factor that should be given much weight in any s 3.4.38(6) application is that the LPA and costs review mechanism in particular have a substantial consumer protection bent. I consider that the provision for the Court to grant an extension of time is the appropriate avenue for any relief that may be sought in circumstances such as these.
Orders
I dismiss the appeal. I shall hear the parties as to costs.
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