Mackowiak v Hagipantelis; Bickhoff v Hagipantelis

[2015] NSWSC 1087

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Mackowiak v Hagipantelis,; Bickhoff v Hagipantelis [2015] NSWSC 1087

Hearing dates:

9 October 2014

Date of orders:

07 August 2015

Decision date:

07 August 2015

Jurisdiction:

Common Law

Before:

Garling J

Decision:

In proceedings 2014/66426, Robert Mackowiak v Lee Hagipantelis:

 

(1) Order pursuant to s 728(1)(a) of the Legal Profession Act 2004 (“the Act”) that the defendant give to the plaintiff a bill of costs in itemised form in respect of the legal services provided by the defendants to the plaintiff in connection with his claim for damages within 42 days of the date of this order.
(2) Pursuant to s 350(5) of the Act, determine that having regard to the delay and the reasons for the delay, that it is just and fair for the Application for Assessment filed on 28 February 2014 (2014/63669) to be dealt with by a costs assessor, notwithstanding the expiration of a 12 month period.
(3)   Order the defendants to pay the plaintiff’s costs of these proceedings.

 In proceedings 2014/69247, Anne Elizabeth Bickhoff v Lee Hagipantelis:
(1) Order pursuant to s 728(1)(a) of the Legal Profession Act 2004 (“the Act”) that the defendants give to the plaintiff a bill of costs in itemised form in respect of the legal services provided by the defendant to the plaintiff in connection with his claim for damages within 42 days of the date of this order.
(2) Pursuant to s 350(5) of the Act, determine that having regard to the delay and the reasons for the delay, that it is just and fair for the Application for Assessment filed on 28 February 2014 (2014/63626) to be dealt with by a costs assessor, notwithstanding the expiration of a 12 month period.
(3)   Order the defendants to pay the plaintiff’s costs of these proceedings.

Catchwords:

COSTS – application for itemised bill of costs from solicitors – s 728 Legal Profession Act 2004 – application for costs assessment under s 350 of the Act – where application made more than 12 months since issue of invoice – where plaintiffs not aware of right to challenge costs earlier – adequate explanation by plaintiffs for lapse in time – no prejudice to defendants if orders made

Legislation Cited:

Legal Profession Act 2004
Limitation Act 1969

Cases Cited:

Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1
Brown v Firth [2013] NSWSC 677
Dale v Firth [2012] NSWSC 1
Dye v Fisher Cartwright Berriman Pty Ltd [2010] NSWSC 895
Estate of Allwood v Benjafield [2009] NSWSC 1383
Firth v Yang [2014] NSWCA 92
Harvey v Goodman Law Pty Ltd [2011] NSWSC 340
Law Society of NSW v Foreman [1994] 34 NSWLR 408
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
Parramatta River Lodge Pty Ltd v Sunman (1991) 5 BPR 12,038
Re Morris Fletcher & Cross’ Bills of Costs (1997) 2 Qd R 228
Swane v Marsh (NSWCA 18 October 1978, unreported)
Yang v Firth [2013] NSWSC 676
Zizza v Seymour [1976] 2 NSWLR 135

Texts Cited:

Equity Doctrines and Remedies 5th Edition, Meagher, Gummow and Lehane

Category:

Principal judgment

Parties:

Robert David Mackowiak (P)
Anne Elizabeth Bickhoff (P)
Lee Hagipantelis and Robert Bryden t/as Brydens Compensation Lawyers (D1 & D2) (both matters)

Representation:

Counsel:
M Castle (P) (both matters)
R Sheldon SC / L Friedwald (D) (both matters)

  Solicitors:
Diamond Conway (P) (both matters)
Brydens (D) (both matters)

File Number(s):

2014/66426,2014/69247

Publication restriction:

Not Applicable

___________________________________________________________________

Judgment

1. In each of these matters, which the Court heard together, the plaintiff applies for the following orders:

“1. An order pursuant to s 728(1)(a) of the Legal Profession Act 2004 (“the Act”) that the defendants give to the plaintiff a Bill of Costs in itemised form in respect of the legal services provided by the defendants to the plaintiff in connection with his claim for damages in respect of an occupiers liability claim.

2. A declaration pursuant to s 350 of the Act, and having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment filed ... to be dealt with by a Costs Assessor notwithstanding that the 12 month period from the time the bill was rendered has now elapsed.”

2. In addition, each plaintiff seeks an order for costs. The defendants in each case oppose the relief sought.

3. For the reasons which follow, I am satisfied that each plaintiff is entitled to the relief sought.

The Claim of Robert Mackowiak

4. On 14 August 2006, Mr Mackowiak injured himself whilst at work in a factory. In respect of that injury he consulted Brydens, a firm of solicitors, of which the defendants are presently the owners.

5. On 22 June 2009, Mr Mackowiak received a letter from Brydens which included the following:

“We refer to our conversation on even date and confirm that the workers compensation division of the firm has referred your file to us to consider the option of proceeding with a common law claim against the owners of the factory where your injury occurred.

As discussed, from the information presently before us, it appears that you may have rights available to you against the factory owner in a common law claim. In order to consider the prospects of success in such a claim, we will make arrangements for you to confer with a barrister, Mr Michael Maxwell, who will provide further advice on the issue of liability and the prospects of success in a common law claim.

We advise that any common law proceedings must be commenced within 3 years of your accident, being 14 August 2009, after which time any common law rights may be lost.”

6. The letter was sent to Mr Mackowiak together with some medical authorities for him to file, a marketing brochure entitled “Firm Profile”, a Standard Conditional Costs Agreement and an Information Sheet.

7. The Standard Conditional Costs Agreement included the following clauses:

“(7)   Billing Arrangements

After the settlement or verdict and funds are received we will prepare a tax invoice setting out the costs and disbursements, and will ask you to attend in conference in order that costs and disbursements can be explained in full to you, and a cheque handed over to you. If you are unable to attend in conference, we will send it to you.

…

(9)   Your Right to have a Bill of Costs

As set out in clause (7) above, we will prepare a full accounting for you after the successful completion of the matter, and will make an appointment for you to see your solicitor to ensure that the final accounting is fully explained to you, and a cheque handed over to you at that time for the net balance due.

We are formally obliged to advise you that the Act prevents a legal practitioner from suing a client to recover costs until 30 days after a bill has been delivered. We are obliged to tell you that the Act gives you the right to apply to the Supreme Court to have a Bill of Costs assessed by a costs assessor. Fortunately the above does not generally happen in these matters, as we are not paid unless there is a successful completion, and we explain the bill of costs to you face-to-face, to ensure it is fully understood by you.

…

If you continue to instruct us after receiving this document, you will be regarded as having entered into it with us.”

8. Thereafter it would appear that Brydens retained counsel and an expert. It appears that in late July 2009, or early August 2009, a Statement of Claim was filed by Brydens in the District Court commencing proceedings on behalf of Mr Mackowiak. During 2009 and 2010, it appears that the proceedings were before the District Court for directions on four occasions.

9. Other preparations were undertaken. Those preparations included referring Mr Mackowiak for examination by Dr Ellis, a qualified medico-legal expert, who provided a report to Brydens with respect to the plaintiff’s injuries.

10. On 8 June 2010, Mr Mackowiak attended at a mediation with representatives of the defendants in the District Court proceedings. The mediator was Sir Laurence Street. Counsel, Mr Michael Maxwell, and a solicitor from Brydens, Mr Wes Ranson, attended the mediation with Mr Mackowiak.

11. In the course of the mediation, a conversation occurred between counsel and Mr Mackowiak in the presence of Mr Ranson. It was to this effect:

“Maxwell:   Robert, their final offer is $230,000. I recommend this to you. It’s the best we are going to get.

Mackowiak:   What amount from the $230,000 am I likely to see?

Ranson:    (having left the room for a short time and returned) I’ve just spoken with Robert Bryden. I estimate you’re up for $110,000 in costs and deductions.

Mackowiak:   That’s too high.

Ranson:   (again after having left the room and returned) I’ve spoken with Robert again. We will reduce our costs. The take out will be $95,000.

Mackowiak:   I don’t know. That seems a lot taken out.

Ranson:   That’s not the final figure. It’s an approximation. It’s the best I can do.

Maxwell:   I recommend the settlement … I believe it is the best you are going to get today, probably more than if you go to Court.

Mackowiak:   OK. On your recommendations, I will settle.”

12. On 10 June 2010, Brydens wrote a letter to Mr Mackowiak which included the following:

“We confirm our appearance on your behalf at yesterday’s mediation before Sir Laurence Street. In accordance with your instructions, settlement was reached with the defendants in the sum of $230,000 inclusive of costs, disbursements and medical expenses.

As discussed, you will receive $132,000 nett after the payment of all costs, disbursements and medical expenses, less any monies owing to Centrelink. We note your instructions that you have not received any Centrelink payments in relation to your claim and on that basis it is unlikely that that agency will render a charge in relation to your claim.

We anticipate that your settlement cheque will be received in approximately 8 weeks, at which time we will contact you to make the necessary arrangements to deposit your settlement funds into your bank account.”

13. Mr Mackowiak, shortly after the proceedings were resolved, left Australia to travel to Europe on his honeymoon.

14. Whilst he was away, Brydens sent a letter to him by email on 20 August 2010, which included the following:

“Further to the completion of your matter, we have now received the Insurer’s cheque in part payment of settlement monies. This has enabled us to attend to our final accounting which is attached, comprising our tax invoice, cash statement and cheque in accordance therewith.

As can be seen from the cash statement the Insurer has deducted and paid Medicare Australia a sum of $23,000 representing 10% of the gross settlement sum. Medicare will now determine whether you of them any monies with benefits it may have paid on your behalf following your accident. Our enquiries disclose that all treatment expenses have been met by your Employer’s Workers Compensation Insurer. That being the case, you can expect to receive back the entirety of the $23,000 presently held by Medicare Australia. We are not aware of any other outstanding medical expenses. Given that your matter is now complete and in accordance with Terms of Settlement, you are liable for any other outstanding medical expenses.

In addition, and as disclosed in the cash statement, the Insurer has deducted and repaid to your Employer’s Workers Compensation Insurer the sum of $25,597.04 in reimbursement of weekly benefits of compensation (wages) and medical expenses as paid by that insurer.” (sic)

15. Attached to that letter was a tax invoice which described in general terms the work done by Brydens and attributed a lump sum cost of $40,000 for the solicitor’s component. The tax invoice then listed disbursements, the total of which came to $24,820.58. After these figures were added together, and GST was added on, the total sum deducted by Brydens from the settlement figures was $71,249.24.

16. On the final page of the tax invoice, underneath the signature block, was a notice. The contents of that notice appeared in much smaller print than the balance of the material on the tax invoice. It included these relevant statements:

“Notice: The Legal Profession Act 2004 (NSW) and Legal Profession Amendment Act 2006 require that the following advice be given:

●   …

● You may apply to have this bill of costs assessed under Division 11 of Part 3.2 of the Legal Profession Act 2004. Any such application should be made to the Manager, Costs Assessment, Supreme Court, within 12 months after this bill has been given to you. …

●   …

●   If a lump sum bill is given to you, you have the right within 30 days to ask for an itemised bill. An itemised bill might include items of costs not taken into account in the lump sum bill, thereby increasing costs. If an itemised bill is required, I reserve my right to rely on the itemised bill as my final bill.”

17. According to the evidence of Mr Mackowiak, the tax invoice formed one of the attachments to the email by which he received the letter, the tax invoice itself, and a cash statement. The attachment was named “Draft Tax Invoice for LH108 2010.doc”. The cash statement was labelled “Draft RB Cash Statement to Client 108 2010.doc”.

18. At the time he opened them, Mr Mackowiak did not read the notice attached on the third page of the tax invoice. He says that it was not until September 2012 that he became aware that he might have a right to challenge Brydens’ costs. I accept this evidence.

19. Mr Mackowiak was referred to Mr Geoffrey Adelstein, a solicitor at Diamond Conway, Solicitors. Mr Adelstein was instructed in December 2012. He sought some preliminary advice from a costs consultant in March 2013. That preliminary advice was provided on 5 April 2013.

20. Thereafter Mr Adelstein obtained from Mr Mackowiak an authority addressed to Brydens to enable him to obtain the file. The file was provided to him by Brydens on 17 April 2013. Mr Adelstein reviewed the file and wrote to Brydens saying that there were a number of documents apparently missing from the file. Mr Adelstein nominated the following documents – Costs Disclosure and Costs Agreement; bills of costs; trust account statements and ledger entries; correspondence with Mr Mackowiak advising him of Mr Maxwell’s fees; and correspondence with Mr Mackowiak advising of any update in respect of fees “… in accordance with the continuing obligation”. Mr Adelstein asked Brydens to search out if those forms were still in their possession.

21. This letter was responded to by Brydens, who indicated that the documents sought were in Mr Mackowiak’s possession. The letter concluded with the following terms:

“This matter was finalised in 2010. If your client has a complaint regarding:

1.    The file transferred to you, or

2.   Our acting for him, or

3.   Our fees

your client has his remedies. No further correspondence from your office will be entertained.”

22. In a letter of 30 July 2013, Mr Adelstein sought copies of documents which had not previously been provided, and informed Brydens that he would commence proceedings if those documents were not provided.

23. This letter was responded to on the following day, 1 August 2013, in terms which were, to say the least, discourteous. That letter said:

“This is all becoming very tiresome.

You and your client know that your client had 12 months from the date of the tax invoice in which to request an itemised bill of costs. Your client chose not to. That time has now lapsed, and in the absence of a court order, there is no legal obligation to provide same now.

The reference to my firm’s ‘attitude’ was, I trust, not meant to be offensive. All that has been done is that it has been brought to your attention, if same was indeed necessary, that there is no obligation to provide an itemised bill of costs, and I do not propose to do so. Continuously making threats does not advance your client’s position.

As to the question of costs, it is indeed a novel suggestion that I would have to pay costs of any application that your client may bring. It is your client who chose to allow time to lapse. It is your client that will be seeking the indulgence of the Court to extend time by a period of about 2 years. Having prosecuted an application or two for an extension of time on behalf of my clients, I am aware that the courts generally will order the party seeking the extension of time, successful or not, to pay the costs of the application. If I understand it correctly, what you are saying is that unless I agree to provide an itemised bill of costs, in circumstances where I have no legal obligation to do so, and your client seeks the indulgence of the court to extend time to require provision of same, then I will have to pay the costs of that application?

Please desist in communicating with me or commence proceedings.”

24. On 28 February 2014, Mr Mackowiak filed, in the Supreme Court, an application addressed to the Manager, Costs Assessment. It was an application for assessment of costs (other than party/party costs). The application to the Manager, Costs Assessment, noted that Mr Mackowiak wanted the matter referred to a costs assessor because he objected to the Bill of Costs. He said that he did not consider the Costs Agreement, which was unsigned and undated, to be a valid one. He sought to have the Costs Agreement set aside as being not fair, just or reasonable under s 328 of the Legal Profession Act 2004 (“LPA”).

25. Mr Mackowiak made an objection to the Bill of Costs in these terms:

“Following the filing of this application, the cost applicant intends to move the court for an order that an itemised bill of costs be delivered and reserves the right to make further objections after those proceedings have completed.”

26. An extensive document entitled “Grounds” was filed with the application to the Manager, Costs Assessment.

27. That document asserted that the conditional costs agreement was not valid because it was in breach, in a number of ways, of the provisions of s 323 of the LPA. The three breaches nominated were that the Costs Agreement was not signed, that it did not contain a statement that Mr Mackowiak had been informed of his right to seek independent legal advice before entering into the Agreement, and finally that it failed to contain information regarding a cooling off period as required by the legislation.

28. The Grounds document also dealt with the cost disclosure, and submitted that it did not comply with s 309 of the LPA in 11 respects. It further noted that the costs disclosure failed to comply with other provisions of the LPA.

29. On 4 March 2014, Mr Mackowiak filed a Summons commencing proceedings seeking the relief to which I have referred in [1] above.

30. As part of the evidence upon which Mr Mackowiak relied, he swore an affidavit. He was cross-examined in respect of that affidavit. Mr Mackowiak said, and I accept, that at the time the discussion of costs took place during the mediation to which I have referred above, he did not hold the view that he was unable to challenge Brydens about what they wanted to charge for costs.

31. He was next taken to an exchange of emails which occurred in August 2010. At that time Mr Mackowiak was in Europe, and Mr Ranson was in Australia. The first email which was sent to Mr Mackowiak was the one to which I have earlier referred and which included the tax invoice and the settlement statement.

32. In response to that email, Mr Mackowiak wrote to Mr Ranson saying:

“Thanks for sending that through again. I had a read through and everything seems fine, the only point that I wanted to raise was the charges for photocopying (Heading: Expert Report Fees):

… This just seemed rather high in my opinion. Is this value correct?”

33. This was responded to by Mr Ranson, pointing out that the item did not relate solely to the photocopying of the expert reports, but was rather the photocopying charge which was computer generated. Mr Ranson reminded Mr Mackowiak of the large quantity of paperwork that was collated in the course of his case that was available at the mediation.

33. This was responded to by Mr Mackowiak saying:

“Thanks for clearing that up. I do realise that a lot of paperwork was generated, but didn’t realise the charge to be so high.

In saying that, I have read and approve of the accounting as sent to me by yourself.

Please advise once the payment has been made.”

35. A couple of days later Mr Ranson wrote by email to Mr Mackowiak informing him that his settlement monies had now been transferred. He included this salutation:

“Thank you again for your instructions. If there are any other legal matters that we can assist with in the future, (eg buying or selling a house etc) please do not hesitate to contact us.”

36. Mr Mackowiak responded:

“Thank you for all the work done. I will keep you in mind if I need legal assistance in the future.”

The Claim of Anne Elizabeth Bickhoff

37. Ms Bickhoff was injured on 26 July 2005, at work, when she was engaged in the process of lifting and handling a large box of shampoo containers. She injured her lumbar spine in the course of that episode.

38. Initially, Ms Bickhoff consulted Brydens in relation to her workers compensation rights. They acted for her and successfully brought her workers compensation claim to a conclusion on or about 15 August 2008.

39. Whilst that was proceeding, on 15 June 2006, Ms Bickhoff received a letter from Brydens advising her that she had a potential common law claim if she could establish that her injury was caused by the negligence of her employer, and if her injury resulted in an impairment of greater than 15% of whole person.

40. Nothing much more seems to have happened with respect to her common law claim until 4 September 2008, when she received from Brydens a letter which confirmed that a conference had been arranged with counsel. That letter enclosed an Information Fact Sheet, Medical Authorities, a Retainer and a Firm Profile.

41. The Retainer was an agreement described as a Conditional Costs Agreement. The form of that agreement was similar that sent to Mr Mackowiak, although there were some differences. Relevantly, the agreement commenced with this statement:

“You were informed separately in writing today about the effect of entering into a costs agreement in excess of the regulated fees. You acknowledge that you wish to enter into this agreement.”

42. The body of the document included a clause providing for how costs would be calculated. A clause that apparently required Ms Bickhoff reimburse Brydens for disbursements which they had paid to others on her behalf “… as and when we send you bills for these payments”.

43. The costs estimate provided a lump sum estimate of $3,000 to obtain instructions and to investigate the cause of action. It provided a table of estimated costs incurred if proceedings were commenced and prosecuted. Relevantly, in Ms Bickhoff’s case, for a verdict or settlement between $500,000 and $1M, Brydens estimated the range of their fees to be between $65,000 and $170,000.

44. Clause 8 and Clause 9 were in the following form:

“(8)   Your right to a Bill of Costs

The Act prevents a legal practitioner from taking court proceedings against a client to recover costs until 30 days after the practitioner has given the client a bill of costs.

(9)   Your right to have a Bill of Costs Reviewed

The Act gives you the right to apply to the Supreme Court to have the charges made in the bill of costs assessed for the fairness and reasonableness by a costs assessor.”

45. The Costs Agreement concluded the same way as that set out above in the case of Mr Mackowiak, with this statement:

“If you continue to instruct us after receiving this Costs Agreement, you will be regarded as having entered into this Costs Agreement and will be billed in accordance with it.”

46. On 3 November 2008, proceedings were commenced in the District Court of NSW claiming damages for negligence against Ms Bickhoff’s employer.

47. In July 2009, Ms Bickhoff attended a mediation of her work injury damages claim in the Workers Compensation Commission. The matter did not resolve.

48. The matter was fixed for hearing in the District Court of NSW from 3 to 5 June 2010. The proceedings commenced and, on the morning of the second day, namely 4 June 2010, the proceedings settled.

49. Ms Bickhoff’s instructions to agree to the settlement were obtained in a conference on the morning of 4 June 2010, in the chambers of Mr Lidden SC, who was the senior counsel conducting her case. According to Ms Bickhoff, and I accept, the settlement occurred in these circumstances, namely, that Mr Lidden SC said to her that the insurer had made an offer of $725,000 and that was the maximum the insurer was prepared to go to. Mr Lidden SC then said:

“Mrs Bickhoff I recommend this settlement to you. It’s as much as you can expect to recover out of this claim. From any settlement the insurer is obliged to deduct 10% as the repayment to Medicare, but you may get some or all of that back once a Notice of Charge issues. In addition, they will deduct and repay the workers compensation insurer the amount previously paid which is in the order of $222,700.”

50. Ms Bickhoff was not advised at that conference of the proposed amount of the costs and disbursements which she owed to Brydens. She was informed by the Brydens representative who was present that Brydens could not give her an estimate of her costs at that stage, but that it would do so shortly.

51. She did not sign any document at the conference giving instructions with respect to the settlement. She was not provided with any documentation at that time.

52. It is apparent that although the agreement to resolve the proceedings was made between the parties on 4 June 2010, the consent judgment was not finally signed until 17 June 2010.

53. On 10 August 2010, Brydens wrote to Ms Bickhoff in the following terms:

“Further to the completion of your matter, we have now received the Insurer’s cheque in payment of the settlement monies. This has enabled us to attend to our final accounting which is attached, comprising our tax invoice and cheque in accordance therewith.

As can be seen from the Cash Statement, a sum of $72,500 has been deducted by the defendant and paid to Medicare Australia. Medicare will now determine whether you owe them for benefits it may have paid on your behalf following your accident. Once that amount has been determined, if anything, it will be deducted from the monies held by them and the balance will be forwarded directly to you. Our enquiries disclose that a nil charge should be issued by them, and in those circumstances you can expect to receive the entirety of the $72,500. We can confirm that there are no other outstanding medical expenses as known to us. Given that your matter is now complete, and in accordance with the terms of settlement, you are liable for any other outstanding medical expenses.

As also disclosed in the Cash Statement, your employer’s workers compensation insurer has been reimbursed for benefits paid on your behalf following your accident. This includes weekly benefits of compensation (wages) and medical expenses.”

54. Attached to that letter was a tax invoice which described, in a global form, the work undertaken by Brydens for Ms Bickhoff. A lump sum amount of $82,000 was claimed for Brydens’ costs. A list of disbursements was provided which totalled $62,286.69. The total of the account, including costs, disbursements and GST was $158,553.65.

55. At the conclusion of the three page tax bill was the Notice in the same size font and style, with the same contents, as this which I have set out in [16] above. A copy of that letter was provided with it which had an endorsement on the bottom in the following terms:

“I hereby acknowledge receipt of the attached cheque and accounting, and signify my approval of same by signing below.”

56. That endorsement was signed by Ms Bickhoff on 11 August 2010, in circumstances where she attended the office of Brydens and was advised by a representative that, if she provided her bank details, which she did, Brydens would arrange for the funds to be sent directly into her account.

57. On that occasion, on 11 August 2010, the endorsement on the third page of the tax invoice was not drawn to Ms Bickhoff’s attention by any member of staff of Brydens. Unsurprisingly, she said that she focussed on the sums of money which she was to receive in total from the settlement. Of the amount of costs, Ms Bickhoff in her affidavit says, and I accept:

“I was disappointed that out of a settlement of $725,000 I was receiving something in the order of 50% and the legal costs and disbursements seemed very high to me. Nonetheless, I accepted that the defendants were experts in their field and I believed at that time that that must be a reasonable amount for their fees and so I did not challenge it when I attended on 11 August 2010.”

58. Ms Bickhoff says, and I accept, that she was not aware that she could challenge the bill until sometime in March 2012. At about that time, she instructed lawyers to advise her. Those lawyers sought the file from Brydens. The file was provided on 7 March 2012.

59. On 20 April 2012, Ms Bickhoff’s first lawyer wrote to Brydens in the following terms:

“I have now had the opportunity to review the file which you forwarded and have obtained instructions from my client in respect of your tax invoice dated 10 August 2010.

Although I have not had the file costed by a costs assessor, I have, based on my review, formed a preliminary opinion of the costs and disbursements that a costs assessor may find to be reasonable as follows:

1. In my view $30,000 would be a reasonable amount to have been charged for professional costs. You have charged $82,000. There is a differential of $52,000.

2. In respect of the disbursements, you have charged a total of $62,000. In my view $42,000 would be found by a costs assessor to be the appropriate figure. The differential is $20,000.

… My client however does not wish to be involved in protracted litigation or costs assessment process and would prefer to have the cost issue resolved by negotiation. I have instructions from my client that she would be prepared to accept $60,000 inclusive of GST, interest and costs in order resolve this matter.

If we are unable to resolve the matter, then I will be requesting that you provide a bill in itemised form, and will thereafter be making either an application for leave to assess the bill out of time or, alternatively, commence proceedings in the District Court.”

60. That letter was responded to promptly by Brydens, seeking a return of their file “… in order that we may prepare it for assessment”. The file was returned on 4 May 2012. Ms Bickhoff’s solicitor asked if the bill could be prepared within 21 days.

61. In response to an enquiry on 6 June 2012 as to progress, Ms Bickhoff’s solicitor was informed that the file had been forwarded to Brydens’ costs assessor. After several further unsuccessful phone calls, Ms Bickhoff’s solicitor wrote to Brydens in the following terms:

“As a matter of professional courtesy I will extend the time for production of my client’s file together with the itemised bill of costs until Friday 20 July 2012. If I do not receive them by that date, I will have no alternative but to file a Summons on Monday 23 July 2012.

… I look forward to receiving the file together with an itemised bill without further delay.”

62. On 16 July 2012, Brydens sent a response confirming that the file had been sent to a costs assessor for assessment, but:

“… that because she was to commence work as a new corporate entity in the new financial year, could not commence assessing the file prior to 1 July 2012. As a result, there is of course a delay in the provision of our costs assessment.”

63. Ms Bickhoff’s solicitor agreed to extend time for the provision of the material until 3 August 2012. No further progress occurred.

64. In about October 2012, Ms Bickhoff instructed her current lawyers, Mr Geoffrey Adelstein at Diamond Conway. On 9 November 2012, he wrote to Brydens informing them that he had taken over the conduct of the matter and asked whether they intended to prepare an itemised bill and, if so, by when. This elicited a response of a different kind to the previous correspondence. On 13 November 2012, Brydens wrote:

“We respond as follows:

1. The tax invoice rendered by the writer’s former partner is dated 10 August 2012 (sic).

2. The initial request for an itemised bill was made in April 2012.

3. Section 332A of the Legal Profession Act 2004 provides that any person who is entitled to apply for an assessment of costs may request an itemised bill.

4. Your client is not a person entitled to apply for an assessment of costs. In that regard your attention is drawn to the provisions of s 350 which provides that an application for an assessment of costs must be made within 12 months after the bill was given.

5. There is no legal obligation upon us to provide a bill in itemised form. If you disagree, then we would be obliged if you would direct our attention to the provisions of the legislation which provides for same.

6. Section 728 of the Legal Profession Act 2004 provides that same does not affect the provisions of Division 11 and Part 3.2 with respect to the assessment of costs. This includes the provisions of s 350.

It seems to us that the legislation clearly provides that your client is out of time for the purpose of demanding an itemised bill, and is out of time with regard to the lodgement of any application for an assessment of costs. If you say we are wrong in that regard, then we would be obliged to hear from you, and perhaps you could bring to our attention the relevant provisions of the legislation upon which you rely and any precedent decisions that assists ...”

65. There was a further exchange of correspondence, as Ms Bickhoff’s solicitor wrote setting out his view of the obligations of Brydens, and Brydens responded. Little is to be gained by setting out this exchange of views.

66. By the end of 2012, or perhaps the early part of January 2013, the file had been returned by Brydens to Ms Bickhoff’s lawyer. Mr Adelstein wrote on 22 January 2013 to Brydens indicating that a perusal of the file had failed to reveal any of the documents which he identified. Included in those documents was a signed costs disclosure and costs agreement document, a bill of costs rendered in the matter, settlement documents signed by Ms Bickhoff authorising payment out and any letters of advice from Brydens advising of any changes regarding original estimates of costs.

67. That letter was responded to on 11 February 2013, copies of some documents were provided, and the balance of the documents were noted as being with the file.

68. Importantly, included in the documents which were provided was a Conditional Costs Agreement bearing the signature of Ms Bickhoff, signed in the presence of a solicitor, whose signature was undecipherable. The document was undated.

69. Thereafter further correspondence ensued about whether Ms Bickhoff was entitled to obtain an itemised bill of costs. It is fair to say that she, through her solicitor, claimed that she was so entitled. Brydens resisted such suggestion and maintained the position that she was out of time to have a costs assessment and therefore was not entitled to an itemised bill. There was no alteration to the respective positions of the correspondents.

70. On 28 February 2014, Ms Bickhoff filed an application for an assessment of costs (other than party/party costs) with the Manager, Costs Assessment at the Supreme Court. She sought in that application to have the Costs Agreement set aside as being not fair, just or reasonable under s 328 of the Act, she attached to the application a statement of the grounds upon which she sought the assessment. She asserted that the Conditional Costs Agreement was invalid because it failed to comply with s 323 of the LPA in two ways. She further submitted that the Costs Disclosure failed to comply with s 309 of the LPA in eight ways, and that it failed to comply with other provisions of that Act.

71. Ms Bickhoff was cross-examined with respect to her affidavit. When taken to the note below the signature block on the tax invoice (the material in smaller script advising her of her rights) Ms Bickhoff accepted that the material had been on the tax invoice at the time she received it, but said that she did not read it. She said that she found reading the document generally difficult, and the fact that the material was in a smaller print, meant that she did not read it. I accept that evidence.

72. I also accept her evidence given in cross-examination with respect to the events on 11 August 2010, when she attended at the offices of Brydens, and when she signed the copy letter approving of the accounting which she had received. It was clear to me from her evidence, and I accept, that whilst she was surprised by the size of the legal fees, trusting in her lawyers she assumed that they were reasonable. She therefore did not question them. She approached the matter as a lay person, not as a lawyer reading the fine print and determining her attitude with time for reflection.

Relevant Legislation

73. It is appropriate to set out the relevant provisions of the Legal Profession Act 2004. I note that it has now been repealed.

74. The particular provisions of the LPA are to be found in Part 3.2 which deals with costs disclosures and assessment. Section 332A is in the following form:

“332A.   Request for itemised bill

(1)   If a bill is given by a law practice in the form of a lump sum bill, any person who is entitled to apply for an assessment of the legal costs to which the bill relates may request the law practice to give the person an itemised bill.

(2)   The law practice must comply with the request within 21 days after the date on which the request is made.

(3)   If the person making the request is liable to pay only a part of the legal costs to which the bill relates, the request for an itemised bill may only be made in relation to those costs that the person is liable to pay.

(4)   Subject to subsection (5), a law practice must not commence legal proceedings to recover legal costs from a person who has been given a lump sum bill until at least 30 days after the date on which the person is given the bill.

(5)   If the person makes a request for an itemised bill in accordance with this section, the law practice must not commence legal proceedings to recover the legal costs from the person until at least 30 days after complying with the request.

(6)   A law practice is not entitled to charge a person for the preparation of an itemised bill requested under this section.

(7)   Section 332(2), (5) and (6) apply to the giving of an itemised bill under this section.”

75. The second provision of the LPA which is relevant is s 350. It is in the following form:

“350.   Application by client or third party payers for costs assessment

(1)   A client may apply to the Manager, Costs Assessment for an assessment of the whole or any part of legal costs.

(2)    …

(3)   An application for a costs assessment made be made even if the legal costs have been wholly or partly paid.

(3A)    If any legal costs have been paid without a bill, the client or third party payer may nevertheless apply for a costs assessment.

(4)    An application by a client or third party payer for a costs assessment within this section must be made within 12 months after:

(a) the bill was given or the requesting for payment was made to the client or third party payer, or

(b) the costs were paid if neither a bill was give nor a request was made.

(5)    However, an application that is made out of time, otherwise than by: (a) a sophisticated client, or

(b) … may be dealt with by the costs assessor if the Supreme Court, on application by the costs assessor or the client … who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12 month period.

…”

76. Each of the plaintiffs is a client within the meaning of s 350 of the LPA. Neither is a sophisticated client. The final section which is relevant, having regard to the relief which is sought, is s 728 of the LPA. It is in the following form:

“728.   The Supreme Court may order up delivery of documents

(1)    On the application of a client of a law practice, the Supreme Court may order the law practice: (a) to give the client a bill of costs in respect of any legal services provided by the law practice, and (b) to give to the client on such conditions as the Supreme Court may determine, such of the client’s documents as are held by the law practice in relation to those services.

(2) Subsection (1) does not affect the provisions of Division 11 of Part 3.2 with respect to the assessment of costs. …”

77. Again, there is no doubt that the plaintiffs are each clients within the meaning of that section and that the defendants area law practice.

78. Section 350 falls within Division 11 of Part 3.2 of the LPA, and is therefore unaffected by the provisions of s 728.

Plaintiffs’ Submissions

79. It is convenient to deal with the submissions of each plaintiff together.

80. The plaintiffs submit that the provisions of s 332A of the LPA give a client a right to request and receive an itemised bill of costs even in circumstances where the 12 month time limit available to a client, who makes an application for an assessment, has passed. The plaintiffs submit that they were each a person who was entitled to apply for an assessment in accordance with s 332A(1) and, having done so, the defendants were obliged to comply with that request within 21 days after the date on which the request was made. The plaintiffs submit that the right of a person to request an itemised bill is not limited by the provisions of s 350(4) of the LPA, which requires a client to make an application for a costs assessment within 12 months after a bill of costs was given, or where no bill was given, the costs were paid.

81. In support of that submission, the plaintiffs drew the Court’s attention to two decisions of Hall J, delivered on the same day, namely Yang v Firth [2013] NSWSC 676 and Brown v Firth [2013] NSWSC 677. In Yang, his Honour noted that this Court had both an inherent and statutory power to order a legal practitioner to give a client, or a former client, a bill of costs: see also Estate of Allwood v Benjafield [2009] NSWSC 1383 at [38]. His Honour went on to say at [90] that the LPA provided a statutory scheme that:

“…is intended to regulate the conduct of legal practitioners and to protect their clients and the public generally from the risks that may from engaging in litigation, including in particular, unexpected or excessive legal costs.”

82. With respect, I agree.

83. His Honour went on to consider whether a plaintiff who had not made an application within the 12 month period specified in s 350(4) of the LPA, was disqualified from making a request under s 332A of the LPA. His Honour was not satisfied that there was such a time constraint on the operation of s 332A. He said at [96]:

“I note the significance placed by the defendant on the limitation period provided for in s 350(4), and the requirement for leave of the Court to dispense with that limitation period under s 350(5). However, in my view, the submission by the defendant that the plaintiff is immediately precluded from his right to obtain an itemised bill under s 332A because the limitation period to make an application for a costs assessment has expired, must be rejected.”

84. In light of these decisions of Hall J, the plaintiffs submitted that the proper interpretation of s 350 was that, although s 350(4) obliged a person to make an application within 12 months, s 350(5) provided for an application which was made out of time. The plaintiffs submitted that the provisions of that subsection recognised that a valid application had been made, although out of time, and that it was open to the costs assessor to deal with that application provided the costs assessor was satisfied of the matters in the section. Accordingly, the plaintiffs submitted, the phrase “must be made within 12 months” is merely directory and not obligatory.

85. The plaintiffs submitted that it would be anomalous if the time limit in s 350, which they submitted was directory only, operated to foreclose the substantive right created by the provisions of s 332A.

86. The plaintiffs also drew attention to the decision of McCallum J in Dale v Firth [2012] NSWSC 1. There, in an ex tempore judgment, her Honour said at [12]:

“I have given careful consideration to the provisions of the legislation dealing with costs agreement and costs assessment and have concluded that the legislature is likely to have intended in s 332A that there should be a bare right to information as to the work undertaken by a solicitor, even if that information would not give rise to any remedy.”

87. With respect to s 728, the plaintiffs submitted that the LPA gave this Court a discretionary power to order a solicitor to provide an itemised bill of costs regardless of whether a request has been made under s 332A of the LPA for an itemised bill of costs, and regardless of whether the time period set out in s 350(4) of the LPA had expired.

88. The plaintiffs relied upon the decision of Hall J in Brown at [28] where his Honour said:

“I have concluded that the power under s 728 to order a legal practitioner to comply with a request by a client for an itemised bill of costs under s 332A is available and should be exercised by way of an order under its provisions. I am of the opinion that, in this case, s 350(5) does not stand in the way of the plaintiff’s pursuit of the orders sought.”

89. The effect of the plaintiffs’ submissions is that s 728 is a discretionary power which stands alone and apart from the provisions of s 350. In part, this interpretation is based upon the provision of s 728(2) which, so the plaintiffs submitted, sought to maintain a separation between the power of this Court to order a bill of costs, and the costs assessment process to be found in Division 11 of Part 3.2 of the LPA.

90. Ultimately, the plaintiffs submitted that the Court should exercise its discretion under s 728 of the LPA to order the provision of an itemised bill.

91. With respect to s 350 of the Act, and the relief sought by the plaintiffs, they argued that it was just and fair for the Court to extend the time. They accepted that the power to extend time was discretionary. Any prejudice to a solicitor was a relevant consideration: Dye v Fisher Cartwright Berriman Pty Ltd [2010] NSWSC 895.

92. Whilst the plaintiffs accepted in submissions that there was presumed to be prejudice to a solicitor where costs were unpaid, the prospect of a solicitor having to refund an amount already paid was not a relevant prejudice: Harvey v Goodman Law Pty Ltd [2011] NSWSC 340.

93. The plaintiffs submitted that a significant factor favouring the exercise of the Court’s discretion was that there is a real or substantial prospect that no valid costs agreement was in existence, that there had been a failure to make disclosures of the kind required by Division 3 of Part 3.2 of the Act, and that the process whereby the defendants had deducted the costs prior to any assessment opportunity arising ought be regarded as a reason why the opaque lump sum bill provided to authorise that deduction, ought be the subject of a requirement for a provision of an itemised bill and the subject of assessment.

Defendants’ Submissions

94. The defendants submitted that the power under s 728 of the LPA, which the plaintiffs seek to invoke, is a discretionary power of the Court which must be exercised judicially. The defendants submitted that, when considering the exercise of the power under s 728, it was important for a court to consider the role of s 350 and whether or not it informed the operation of s 332A.

95. In addressing this question, the defendants drew attention to the decision of the Court of Appeal in Firth v Yang [2014] NSWCA 92 where, at [3], the Court in refusing leave to appeal said:

“Section 332A, which gives a right to itemisation of a lump sum bill, clearly cross-refers to s 350 because the right is given to a person ‘who is entitled to apply for an assessment of the legal costs to which the bill relates’. However, the extent of the role s 350 plays in relation to s 332A is a matter for argument. In particular, there is a question, relevant here, of whether the time limitations in s 350 restrict the right given by s 332A.”

96. The defendants drew attention to the fact that having identified the question, the Court of Appeal noted that it was not necessary to determine it because, in that case, it was a hypothetical question.

97. With respect to s 350(4) of the LPA, the defendants submitted that the time limitation was not merely directory, as the plaintiffs had submitted, but that it “imposes a time limit on the making of an application for assessment”. The defendants submitted that the subsection is in mandatory terms, and that to be of any effect an application must be made within 12 months. The defendants submitted that no application may be made more than 12 months after the relevant date.

98. In effect, the defendants submitted that once the 12 month period had expired, a client was not entitled to apply to have costs assessed because, the period having expired, there was no vested right to apply for assessment. In those circumstances, the defendants submitted, a client was not a person entitled to apply for an assessment in accordance with s 332A of the LPA because the 12 month period had expired.

99. The defendants pointed to the fact that in order to obtain an extension of time under s 350(5) of the LPA after the requisite time period had expired, the Court was obliged to determine whether it was just and fair for the application to be dealt with having regard to the delay and the reasons for the delay. From this the defendants reasoned in their submissions that, if it was not fair and just to permit an assessment process to proceed after 12 months from the relevant event, it would be unduly onerous after that period to require the solicitor to itemise a lump sum bill of costs. The defendants submitted:

“To do so would have the effect of imposing the very injustice and unfairness on the legal practitioner which the time limit and the test for its enlargement seek to avoid. If the solicitor were required to provide an itemised bill in anticipation of the Court declaring it ‘fair and just’ the practical effect of the requirement and limitation would be destroyed.”

100. Put a different way, the effect of the defendants’ submissions is that unless and until a client obtains an extension of time under s 350(5), there is no entitlement in the client to request an itemised bill of costs under s 332A of the LPA.

101. In each case the defendants went on to make submissions about the particular features of each application which would suggest that, as a matter of discretion, even if the power did exist, the Court would not exercise it.

102. It is convenient to resolve first the issue of principle relating to the construction of the Act before considering, if necessary, any issue of individual discretion in each case.

Discernment

103. Before turning to the terms of the legislation, it is relevant to note some features of the context in which the relationship of solicitor and client exists.

104. The first is that a solicitors relationship with their client is defined by the contract or retainer entered into. Thus the relationship is, in the first instance, a contractual one. But to describe it as merely contractual would be to risk an overly simplistic analysis. A solicitor, whether the retainer is for the purpose of litigation or for non-litigious purposes, is an officer of the court. This court retains an inherent jurisdiction to deal with questions relating to the professional conduct of a solicitor. As Kirby P said in Law Society of NSW v Foreman [1994] 34 NSWLR 408 at 412, this court is the guardian of the maintenance of the high standards expected of legal practitioners, particularly in their dealings with their clients and the courts.

105. The second feature is that the Court has an inherent power to order a legal practitioner to give to a client or former client, a bill of costs: Parramatta River Lodge Pty Ltd v Sunman (1991) 5 BPR 12,038 at 12,040; Estate of Allwood v Benjafield [2009] NSWSC 1383 at [38], see also Re Morris Fletcher & Cross’ Bills of Costs (1997) 2 Qd R 228.

106. The third feature is that the relationship between a solicitor and their client is classically a fiduciary one: Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 463. The fiduciary obligation and the duties which it entails are derived from what the solicitor undertakes, or is deemed to have undertaken to do in the particular circumstances. That is because not every aspect of a solicitor/client relationship is fiduciary. As well, fiduciary components of relationships will vary from case to case: Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 45 [185]-[188].

107. As Mahoney JA said in Foreman at 435 a solicitor is in a fiduciary position with respect to their client. He also said that the fiduciary obligation of a solicitor exists both with respect to the making of an agreement with their client and, also to the carrying out of the agreement.”

108. The context in which Mahoney JA was expressing that view was that of a costs agreement between a solicitor and client, which was a time charging cost agreement. His Honour went on to say at 437:

“… a costs agreement which provides for charges on an hourly or similar basis is likely to involve a conflict between the solicitor’s duty and his interest. Such an agreement ordinarily involves that the solicitor may determine how much time is to be spent on the client’s litigation and by whom. It will therefore put the solicitor in a position in which her duty to her client (to do the work in such time that the costs would be no more than they need to be) may in conflict with her interest (that she receive more costs rather than less).”

109. As the authors of Equity Doctrines and Remedies 5th Edition, Meagher, Gummow and Lehane say at [5-130]:

“Hence it has been said that a solicitor is obliged to inform the client who is entering a time charging agreement of the normality or otherwise of that system; of the risk that it might result in a higher bill than tasks performed charging; of the fact that the latter was the traditional method of charging; of the fact that bills may be taxed, how, and how the agreement affected this right. These cases illustrate the existence of fiduciary duties even before the solicitor is actually retained. That the disclosure must be a full disclosure is strikingly illustrated by Boardman v Phipps”. (Footnotes omitted).

110. Against this background of complexity of relationship, one needs to consider the possible avenues for a client, such as these plaintiffs, to obtain relief with respect to a solicitor’s charges for costs. There are a number.

111. In the first place, if there is a valid and enforceable costs agreement, and costs are charged otherwise than in accordance with that agreement, then speaking generally, there will be available relief for a breach of contract including a claim for damages. Because tortious duties can arise from the relationship of solicitor and client if, in relation to the charging of costs, if a breach of a tortious duty has occurred and can be demonstrated, then damages may be recoverable.

112. The charging of excessive costs may, depending upon the circumstances, including the extent of the overcharge, constitute a breach of fiduciary duty on the basis that the principal, i.e., the solicitor, has enriched themselves inappropriately at the expense of the person to whom the fiduciary obligation is owed, namely the client. Where the extent of the overcharge of costs by the solicitor is such as to constitute a breach of fiduciary duty, then the client has open a claim for equitable compensation or other equitable remedy to restore the position.

113. These remedies exist without resort to the provisions of the LPA. These remedies at law or in equity can be enforced at any time, subject only to any applicable limitation periods fixed by the Limitation Act 1969.

114. In parallel with these general law rights, the LPA created additional rights dealing with the question of the provision of bills of costs, and costs assessment. The relevant provisions have been set out above.

115. Section 728(1)(a) of the LPA is a stand-alone power which provides this Court with the discretion to order a lawyer to give their client a bill of costs in respect of any legal services provided. Section 728 of the LPA forms part of an act which has both remedial and protective objects: see s 3 LPA; Dale v Firth at [17].

116. As Young J noted in Parramatta River Lodge at 12,041:

“Accordingly the law, either in legislation or by the use of the inherent power of the court, has always required there to be a detailed statement from the solicitor both as to costs and disbursements.”

117. Such a bill, in detailed form, is one way in which a solicitor discharges their fiduciary obligation to provide full disclosure to their client so that their client may be in a position to determine whether they may seek to follow the path of assessment provided in the legislation, or to engage some other remedy against the solicitor available in the general law.

118. The legislation, in its terms, does not constrain s 728 of the LPA by reference to any other provision. It does not make the power of the Supreme Court to order the delivery of a bill of costs subject to any time limit, and it does not make it subject to any other provision of the LPA, including whether or not a costs agreement exists, or, if one does exist, whether or not it is valid. It is a power expressed in an entirely unconstrained way.

119. There is no reason for it, and as a matter of principle it ought not, to be constrained. Section 728 of the LPA provides a discretionary power to make a particular order. The discretion is unconstrained. The power must be exercised judicially.

120. Undoubtedly, the facts, matters and circumstances in each case will vary. What is relevant or of greater importance will also vary from time to time as impacting upon the judicial exercise of the discretion.

121. The relevance and importance of an itemised bill of costs was discussed by Moffitt P in Zizza v Seymour [1976] 2 NSWLR 135 at 139, where his Honour said, with respect to provisions requiring the service of an itemised bill:

“The relevant provisions are designed to make the client, or person to be charged, properly aware of, and have time to consider, the amount of the solicitor’s charges. He is then better able to make decisions as to payment of the bill, or having it taxed.”

122. His Honour discussed the matter at greater length in Swane v Marsh (NSWCA 18 October 1978, unreported) at page 5, in remarks directed to the necessity for, and contents of, a bill of costs. His Honour said:

“Lord Blackburn, delivering the judgment of the Privy Council in Duffett v McEvoy, 9 AC 300 at 302 said:

‘If there had never been any bill at all … that is to say nothing that would give any details or items or enable the parties to judge the goodness of the items, the bill may be ordered to be delivered …’

This explains the essential purpose of a bill which the court is empowered to order to be provided for a client, and which the court should order unless there has been a proper bill already rendered. The account here quite fails to perform this function. …

Delivery of a bill particularising the work done of a solicitor as a condition precedent to the enforcement of right to payment is of most ancient origin.”

123. One matter which will generally be relevant to the exercise of discretion under s 728 of the LPA, is whether or not a request under s 332A of the LPA has been made, and if so, when it was made, and what the response to the request was. Because this will generally be a relevant matter, it is important to deal with the submissions made to this Court as to whether a client is entitled to apply for an assessment of legal costs, and therefore as a person who may request the solicitor to provide an itemised bill in accordance with s 332A(1) of the LPA.

123. The time limit which is sought to be imported into the entitlement requirement of s 332A of the LPA, namely 12 months, is the one which is expressed to relate to the process of costs assessment described in s 350 of the LPA.

124. But, s 332A of the LPA, namely a provision enabling a client to request an itemised bill, ought not be read as containing any limitation of the purpose for which such an itemised bill is to be used. One purpose is obviously to enable the client to consider whether the statutory assessment of the costs process should be engaged. But there are other reasons why a client may request a bill. It may be that the client wishes to assert that there has been a breach of contract, and take proceedings for that breach. It may be that the client wishes to examine whether there has been a breach of fiduciary obligation and, if so, to what extent, and whether proceedings are justified.

125. It may be that the client simply wishes to be assured that the solicitor has included all relevant items in the lump sum bill, and that the client will not be faced with any further claim by the solicitor. That assurance may be the basis for the making of financial decisions by the client with respect to the proceeds of the litigation.

126. The point to be made is that a client may use an itemised bill of costs for entirely proper and legitimate reasons other than to engage in the assessment process.

127. Section 332A of the LPA provides a statutory mechanism whereby a client can request a bill from a solicitor. The use of the phrase “any person who is entitled to apply for an assessment of a bill of costs” with respect to a lump sum bill, is a phrase which is apt to cover more than the specific client. There are circumstances in which a person who is not the client may be under a legal obligation to pay all or part of the legal costs, i.e., a third party payer as that term is defined in s 302A of the LPA. The concept of a third party payer may include also a person who does not owe a legal obligation to the lawyer, but to the client.

128. From time to time, litigation funding arrangements are put in place by which litigation is funded by a person or corporate entity other than the client. Depending upon the contractual arrangements, that person may have an entitlement to seek an itemised bill of costs. Section 350 of the LPA provides such a person with the ability to apply for an assessment of costs.

129. There is no reason to read s 332A of the LPA as not including either or both of those descriptions. There is no reason to read s 332A as being limited in time.

130. There is another reason not to impose the time limit with respect to s 332A of the LPA which is set out in s 350. It is clear from the terms of s 350 of the LPA that an application can be made before or after the 12 month period. Such an application is a valid application. The difference is that, if the application is made prior to the expiry of the 12 month period, the costs assessment process will follow as a matter of course.

131. If the application is made after the expiry of the 12 month period, the costs assessment process may be dealt with by the costs assessor, provided that the applicant is not a sophisticated client and provided that this Court, having regard to the delay and the reasons for the delay, determines that it is just and fair that the application be dealt with. It is not insignificant that the legislation provides for this Court to determine it is fair and just to proceed upon application by the costs assessor. In other words, the fact that the costs assessor can apply to this Court for that determination reinforces the position that the application made to the costs assessor is a valid one.

132. If it were not valid, and the section was mandatory, as contended for by the defendants, then there would be no basis for the costs assessor to apply to this court for an extension of time, and the costs assessor would have no power so to do.

133. In my view, the 12 month limitation period in s 350 of the LPA is not applicable to prevent a client requesting an itemised bill in accordance with s 332A of the LPA.

134. It is next necessary to turn to whether, in the circumstances of these cases, the Court is persuaded that it is just and fair for the application for assessment to be dealt with by a costs assessor, notwithstanding the lapse of time.

135. It will be convenient to consider both matters of discretion, namely with respect to ss 728 and 350 of the LPA, together with respect to each plaintiff.

Mr Mackowiak – Discretionary Matters

137. At the time the Summons was filed, a little over three and a half years had passed since the invoice and settlement documents had been provided to Mr Mackowiak, in August 2010.

138. It is important to examine how that time period elapsed. Mr Mackowiak says, and I accept, that he did not come to realise that he had an entitlement to challenge the costs charged by the defendants until about September 2012.

139. The defendants submit that this lapse of time should be laid at the feet of Mr Mackowiak because he knew sufficiently of his right to challenge the bill because he had questioned an item contained within it with respect to photocopying at the time it was delivered. The defendants further point to the notice in smaller font size attached to the bottom of the tax invoice which set out information about having the bill of costs assessed, seeking an itemised bill and engaging the question of whether the costs agreement could be set aside as being not fair and reasonable.

140. Mr Mackowiak, in evidence, explained that in his particular circumstances the detail of that material did not come to his attention, and whilst he had challenged an item for photocopying contained in the disbursements, he did not feel in a position to question the sum of legal costs contained in the lump sum bill. I accept the plaintiff’s explanation. A lump sum tax invoice is by its nature opaque. It is almost impossible for a lay person, unskilled in the area of legal costs and inexperienced as to what is or is not a fair charge, to realise that the sum charged by the solicitors is, or is not, fair and reasonable. Adding the notice at the bottom of the tax invoice in a smaller font, and in a way which is less than easily readable and complex, does not, in my opinion, constitute adequately notifying the client of their rights and entitlements.

141. To put something into “fine print” is to minimize its significance and to invite the client to ignore it. That is not sufficient, in my opinion, to put a client on notice of their rights under the Act in such a way that any later application ought be viewed unfavourably on the part of delay occasioned by a client not coming to know of their rights or entitlements to challenge a bill.

142. I do not lay the fault for this two year lapse of time at the feet of Mr Mackowiak. Mr Mackowiak instructed a solicitor within a reasonable time after hearing of his ability to challenge a bill, about three months.

143. The solicitor undertook investigations, including instructing a costs consultant to provide some preliminary advice regarding the matter and then, having received that advice, engaged in correspondence with the defendants. First the file was sought and then after its examination, and in light of the preliminary view formed by the solicitor for the plaintiff, a request was made for an itemised bill. The time between the instructing of Mr Adelstein and the commencement of proceedings was, I am satisfied, reasonably necessary to enable the appropriate steps to be taken to give advice to Mr Mackowiak, and to make the request for the itemised bill.

144. Thereafter time was properly taken to draft the grounds to be filed with an application for an assessment, and to bring these proceedings.

145. I do not regard this lapse of time as being a default on the part of Mr Mackowiak. It was simply the time taken, perhaps not with the alacrity which would be desirable, but nevertheless, not an unreasonable period, for the appropriate steps to be taken before the summons could be brought.

146. The file still exists. There is no evidence to suggest that a full bill of costs could not be provided. The defendants put on no evidence to suggest that any of its accounting or other records, including time charging records with respect to Mr Mackowiak do not exist, there is no evidence to suggest that the solicitors who worked on Mr Mackowiak’s file are no longer available to provide any assistance, if required, to the defendants in order that an itemised bill of costs may be prepared. Nor is there any suggestion that there is any reason why an assessment of costs could not be fairly undertaken by a costs assessor.

147. Any lapse of time of the kind here present raises a question as to whether the Court should presume, by reason of that lapse of time, that there is some prejudice. However, it is difficult to attribute any significant weight to that presumptive prejudice where a defendant, here a firm of solicitors, has an opportunity to raise in evidence matters of specific prejudice, and no such evidence is advanced.

148. The grounds attached to the Application for a Costs Assessment suggest that, if they are established, there may be substance in the plaintiff’s submissions that the obtaining of an itemised bill, and the process of assessment, will result in an outcome which is substantively in favour of the plaintiff. Putting it differently the grounds, drawn as they are upon the basis of advice received from a costs consultant, satisfy me that if an itemised bill was ordered to be provided, and time was extended, an assessment would not be a futile process.

149. The defendants submit that the acknowledgment by Mr Mackowiak that he was satisfied with the bill and satisfied with the services provided by the defendants in an overall sense, is an important matter for the Court to consider in the exercise of its discretion. The defendants submit that the Court would not favourably view what is, in effect, a change of mind by a former client, many years after the events had concluded.

150. I do not accept that submission in the circumstances of this case. Little weight can be given to an expression of satisfaction by a client with respect to the conduct of a solicitor which is not based upon full information as to the solicitors conduct, in this case the level of charges. No doubt, Mr Mackowiak was pleased and satisfied with the manner in which the defendants went about representing him, and obtaining a resolution of his claim through a mediation process and in a personally timely manner, in the sense that it was concluded before he left for Europe on his honeymoon. However, I would not take Mr Mackowiak’s expressions of satisfaction and gratitude as relating to anything more than that and certainly not, in the absence of full disclosure, to an expression of satisfaction that the costs charged by the solicitor were fair and reasonable.

151. I am satisfied that there has been an adequate explanation for the lapse of time. I am satisfied that there is no actual prejudice to the defendants by the making of either of the orders sought. I am satisfied that the making of the orders and the requirement for the delivery of a bill of costs and the assessment process would not be a futile exercise.

152. And, I am satisfied that it is generally in the public interest that, where an apparent issue of substance is raised with respect to the costs of a solicitor, that solicitor ought be required to justify those costs by the provision of an itemised bill, and by that itemised bill being submitted to the assessment process.

153. I am satisfied that the Court should exercise its discretion under s 728 of the LPA to order the provision of a bill of costs to Mr Mackowiak. I am also satisfied notwithstanding the delay and the reasons for them, that within the provisions of s 350(5) of the LPA, it is just and fair for the application for assessment to be dealt with.

Ms Bickhoff - Discretionary Matters

154. Ms Bickhoff’s proceedings were finalised in June 2010 by the entry of consent orders. She received the tax invoice and covering letter, which she signed on 11 August 2010.

155. No complaint was made about the level of the legal costs at that time, and as is clear from her signature, Ms Bickhoff authorized, and approved of, the accounting with which she was presented.

156. That signature was placed on those documents without any additional explanation being provided to her. The documents were of the same style as those given to Mr Mackowiak. The notification to Ms Bickhoff of her rights to challenge the bill or obtain an itemised bill was in a notice at the bottom of the tax invoice and in a smaller font than that of the balance of the invoice.

157. I accept that Ms Bickhoff did not know that she could challenge her bill until sometime in March 2012. Having heard that she might be able to challenge her bill, in my view she moved reasonably promptly to instruct a solicitor. Although Ms Bickhoff said that she learnt that she could challenge the bill for the first time in March 2012, it is apparent that she had instructed Barton Lawyers at some time prior to 7 February 2012, because on that day Barton Lawyers first wrote to Brydens with respect to her matter. It is not of any significance in this assessment as to whether Ms Bickhoff was correct about the March date. I accept that until she heard via a conversation with a friend, and a radio advertisement about her entitlement to challenge legal costs, she was unaware of her ability to challenge the tax invoice which she had received from Brydens.

158. The period from February 2012 until the Summons was filed, was occupied by lawyers retained by Ms Bickhoff attempting to obtain her file, attempting to obtain an itemised bill of costs, and taking appropriate steps to prepare for the lodging of an assessment obligation and these proceedings.

159. A significant part of that delay was occasioned by the defendants not providing the file to Barton Lawyers in accordance with Ms Bickhoff’s directions, in a timely manner. The first request for the file was made on 7 February 2012 - the file was not provided for a month. Thereafter a reasonable offer to resolve the dispute was made, and the defendants sought the return of the file “in order that we may prepare it for assessment”.

160. At that time this letter seemed to accept that a request which had been made under s 332A of the LPA for an itemised bill, was to be complied with. I note that the request made by Barton Lawyers did not specifically point to s 332A of the LPA, but I have not the slightest doubt that the defendants understood the basis of that request.

161. The file was returned to the defendants in May 2012 to enable the preparation of an itemised bill of costs. Thereafter there was significant delay as the defendants continuously informed Ms Bickhoff’s solicitors that the costs assessor who had been retained was not in a position to carry out the work.

162. In September 2012, by which time an itemised bill had still not been prepared, notwithstanding what the solicitors for Ms Bickhoff had been told, the matter apparently came to the attention of the first defendant in these proceedings, Mr Hagipantelis.

163. At about that time, Ms Bickhoff transferred her file to her present solicitors. In November 2012, the defendants were informed by Mr Adelstein that he had taken over the matter. Mr Adelstein asked for advice as to whether, and if so, when, the defendants would prepare an itemised bill.

164. By this time, clearly, the defendants’ attitude had changed. As set out above, the letter of 13 November 2012 declined to provide an itemised bill notwithstanding all which had previously passed. Thereafter, time was occupied by correspondence between the solicitors in an attempt to obtain an itemised bill.

165. The only delay which can be laid at the feet of Ms Bickhoff is that between August 2010 and about the commencement of 2012, when she did nothing to seek advice about or to engage in steps towards challenging the bill.

166. I am satisfied, for reasons which are essentially the same as those in Mr Mackowiak’s case, that such a delay is not an unreasonable one in the circumstances. Ms Bickhoff is a person without qualifications or expertise in understanding the extent of the legal costs which she was charged, and whether they were fair and reasonable. She had every reason to trust the defendants as her solicitors, even if she was surprised by the level of deductions from her gross settlement sum.

167. The notice appended to the tax invoice was not adequate to draw her attention to her rights to challenge the bill. She is not to be held responsible for the delay.

168. The delay from February 2012 for approximately two years until the Summons was filed, can be attributed to both the solicitors for Ms Bickhoff taking appropriate steps to prepare the matter, and also to the defendants who initially offered to prepare an itemised bill, allowed significant time to lapse whilst attempts were made to have that itemised bill prepared, and then declined to provide such a bill.

169. This delay is not, in my assessment, sufficient to preclude the Court exercising its discretion.

170. The defendants have provided no evidence of any actual prejudice with respect to the preparation of an itemised bill, or the undertaking of an assessment process. The correspondence of the plaintiff’s first solicitors, Bartons Lawyers, and the expert report from the costs assessor, both raise matters which, together with the grounds attached to the application for assessment, satisfy me that the preparation of an itemised bill, and the engagement of the assessment process, would not be a futile exercise.

171. There is a public interest of the kind I have previously discussed in allowing the assessment process to take place, and in requiring the defendants to provide an itemised bill.

172. I am satisfied that I should exercise my discretion under s 728 of the LPA to order the preparation of an itemised bill, and I am satisfied further that it is just and fair for the application for the assessment of costs made by Ms Bickhoff to be dealt with even though there has been a delay of greater than 12 months.

173. Accordingly, the Court should make the orders sought.

Costs of These Proceedings

174. There is no reason why costs should not follow the event. I will make an order that the defendants pay the costs of the plaintiffs of these proceedings.

Orders

175. In proceedings 2014/66426, Robert Mackowiak v Lee Hagipantelis I make the following orders:

1. Order pursuant to s 728(1)(a) of the Legal Profession Act 2004 (“the Act”) that the defendants give to the plaintiff a bill of costs in itemised form in respect of the legal services provided by the defendants to the plaintiff in connection with his claim for damages within 42 days of the date of this order.

2. Pursuant to s 350(5) of the Act, I determine that having regard to the delay and the reasons for the delay, that it is just and fair for the Application for Assessment filed on 28 February 2014 (2014/63669) to be dealt with by a costs assessor, notwithstanding the expiration of a 12 month period.

3. I order the defendants to pay the plaintiff’s costs of these proceedings.

176. In proceedings 2014/69247, Anne Elizabeth Bickhoff v Lee Hagipantelis I make the following orders:

1. Order pursuant to s 728(1)(a) of the Legal Profession Act 2004 (“the Act”) that the defendants give to the plaintiff a bill of costs in itemised form in respect of the legal services provided by the defendants to the plaintiff in connection with his claim for damages within 42 days of the date of this order.

2. Pursuant to s 350(5) of the Act, I determine that having regard to the delay and the reasons for the delay, that it is just and fair for the Application for Assessment filed on 28 February 2014 (2014/63626) to be dealt with by a costs assessor, notwithstanding the expiration of a 12 month period.

1. I order the defendants to pay the plaintiff’s costs of these proceedings.

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Decision last updated: 07 August 2015