Marshalls & Dent & Wilmoth v Tandos
[2024] VSC 44
•15 February 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
S CI 2023 04805
| MARSHALLS & DENT & WILMOTH (A FIRM) | Applicant |
| v | |
| GEORGE TANDOS | First Respondent |
| and | |
| ABBEYVALE PTY LTD ACN 005 554 834 (ATF THE FIRST TANDOS FAMILY TRUST) | Second Respondent |
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JUDGE: | Quigley J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 February 2024 |
DATE OF JUDGMENT: | 15 February 2024 |
CASE MAY BE CITED AS: | Marshalls & Dent & Wilmoth v Tandos |
MEDIUM NEUTRAL CITATION: | [2024] VSC 44 |
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LEGAL COSTS — Application for assessment of costs — Application made out of time — Standing of the law firm to bring the application — Costs Court a ‘costs assessor’ for the purposes of the application — Just and fair for the application for assessment to be dealt with — Application granted — Legal Profession Uniform Law s 198 — Rohowskj v Tomyn & Co [2015] VSC 511, Eventus Ltd v Richens Pty [2021] VSC 370 and Peter Szabo Family Law Pty Ltd v Young [2023] VSC 756 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Ms S V Kipen | Marshalls & Dent & Wilmoth Lawyers |
| For the Respondents | Mr S Bunce | A Agrotis & Associates |
HER HONOUR:
INTRODUCTION
The applicant is a law firm that acted for the respondents between November 2020 and October 2021 in relation to two separate matters in the County Court.
Invoices were rendered by the applicant between 22 December 2020 and 25 October 2021 amounting to $56,378.03,[1] of which $34,105.40 has been paid. The outstanding amount claimed is $22,985. The said outstanding amount plus interest was claimed in a proceeding issued in Magistrates’ Court proceedings filed on 14 April 2022.
[1]Affidavit of Alex Di Blasi (28 November 2023), Exhibit ADB-1/21-71 (‘Di Blasi Affidavit’).
Orders were made in the Magistrates’ Court proceeding on 16 August 2023 staying the applicant’s claim pursuant to s 178(1) of Schedule 1 of the Legal Profession Uniform Law Application Act 2014 (Vic) (‘Uniform Law’), reserving costs and granting liberty to apply.[2] These orders were made as a result of the Magistrates’ Court finding that the applicant’s costs agreement and disclosure statement was void and thus could not be relied upon.
[2]Ibid, Exhibit ADB-1/108-109.
By summons dated 6 October 2023, the applicant applied for an assessment of its legal costs pursuant to s 198 of the Uniform Law.
On 8 November 2023, a Judicial Registrar referred the application to the Practice Court pursuant to s 198(4) of the Uniform Law for determination as to whether it is ‘just and fair’ for the application to be dealt with more than 12 months after the final bill.
The question for determination is whether it is just and fair for the application to be dealt with after the expiry of the 12‑month period set out in s 198(4) of the Uniform Law.
The applicants submit that it is ‘just and fair’ to make the application sought and rely on the affidavits of Alex Di Blasi sworn on 28 November 2023 (‘Di Blasi affidavit’) and 30 January 2024 (‘the Second De Blasi affidavit’), respectively.[3]
[3]Affidavit of Alex Di Blasi (30 January 2024), Exhibit ADB-1/123 (‘the Second Di Blasi Affidavit’).
The respondents oppose the extension of time on its merits and further argue the applicant does not have standing to bring the application. They rely on the affidavit of Anastasia Koutsimanis dated 19 December 2023 (‘Koutsimanis affidavit’).
Both parties filed written submissions[4] and made oral submissions at the hearing.
[4]Applicant’ Submissions (28 November 2023); Applicant’s Submissions in Reply (23 January 2023); and Respondent’s Outline of Submissions (19 November 2023).
RELEVANT LEGAL PRINCIPLES
The parties agreed that the guidance set out by his Honour Justice John Dixon in Rohowskyj v Tomyn & Co[5] ought be adopted by this Court in determining whether an extension of time be granted and the considerations of what might be ‘just and fair’. Those matters were:
[5][2015] VSC 511.
(a) The period of delay;
(b) The reasons for the delay;
(c) Whether it is just and fair having regard to:
(i) Whether the costs assessment would be futile;
(ii) The extent of any prejudice to the respondent; and
(iii) The right of one party to seek an assessment and the right of the other party to have the assessment conducted in the statutory period.
FACTUAL BACKGROUND
The parties were in dispute as to the occurrence (and frequency of occurrence) with which the client raised dissatisfaction with the fees charged by the law firm and whether there was a verbal agreement to cap the fees at $35,000. Also in issue was the respondents’ defence based on the validity and enforceability of the costs agreement and disclosure statement, in particular when the applicant had been put on notice of this defence and as a consequence the promptness of response. These matters essentially go to the merits of the claim, a factor which was argued on behalf of the respondent to be relevant to the determination of whether it was fair and just to grant the extension of time. To some extent the delay and the costs incurred as a consequence of delay may be relevant. Insofar as it provides some context to the dispute and to the extent that I have taken into account the actions of the parties as being relevant, I have set out the following gleaned from the Di Blasi and Koutsimanis affidavits and the documents annexed to them.
The applicant acted for the respondents in relation to two County Court proceedings[6] which were described as involving a loan debt.[7]
[6]The pleadings in respect of these two matters were not before the Court.
[7]The pleadings were not before the Court
On or about 13 November 2020, the applicant provided the respondents with information regarding the estimated legal costs and disbursements. A document described as a formal costs agreement and disclosure statement was provided on 8 December 2020.[8]
[8]Di Blasi Affidavit (n 1), 5(b) and Exhibit ADB-1/11-16.
The respondent says that the applicant represented that the legal costs would be between $30,000 and $35,000 (inclusive of GST and disbursements)[9] and based on that representation agreed to engage the law firm.
[9]Affidavit of Anastasia Koutsimanis (19 December 2023) [6] (‘Koutsimanis Affidavit’).
By email dated 31 August 2021 the first respondent wrote to the applicant alleging that at no time did he receive the costs agreement and that he did not sign or authorise any such fee agreement nor the charge rate of $605 per hour.[10] This was disputed by the applicant by reply email on 2 September 2021.[11]
[10]Ibid Exhibit AK1/13.
[11]Ibid AK1/12-13 see correspondence between the parties to this effect at AK1/11-15.
Invoices were rendered between April 2021 and October 2021 which have not been fully paid by the respondents. The respondents have paid $35,000. An amount of $22,985.13 remains outstanding.[12]
[12]Ibid [8].
Following correspondence between June 2021 and March 2022 the applicant filed proceedings in the Magistrates’ Court to recover the outstanding fees.[13]
[13]Ibid [12] and Exhibit ADB-1/80-85.
On 1 June 2022 the respondent submitted a complaint to the Victorian Legal Services Board and Commissioner (‘VLSBC’) in relation to the applicant ‘s costs. The VLSBC informed the respondents that they could not assist as the matter was before the Magistrates’ Court.[14]
[14]Koutsimanis Affidavit (n 9) [19], Exhibit AK1/22-24.
The respondents filed a defence on 6 July 2022. The basis of the defence was that the applicant had agreed to fix or cap the fees by verbal agreement.[15]
[15]Ibid AK1/25-28, see Respondents’ Defence to the Magistrates’ Court claim.
The respondents sought Counsel’s advice. As a result of that advice, the solicitors for the respondents informed the applicant on 9 March 2023 that their Costs Disclosure was defective and void under s 178 of the Uniform Law and that the current proceedings in the Magistrates’ Court were improper and should be discontinued to prevent any unnecessary costs being incurred.[16]
[16]Ibid [24], Exhibit AK1/38-40.
The matter was listed for trial on 10 March 2023.
At the hearing, Counsel for the respondents raised the matter of the defective costs agreement and sought leave to file an amended defence and vacate the hearing. The applicant says that this was the first occasion that the contravention of the applicant’s Uniform Law disclosure obligations was raised. This occurred approximately 11 months after the proceeding had been filed, and 5 months after the 12‑month period under s 198 of the Uniform Law had expired.
The matter was relisted for 16 August 2023. At this hearing Judicial Registrar Keogh-Barnes held that the costs agreement was void and ordered that the proceeding be stayed until the costs were assessed by the Costs Court.[17]
[17]Di Blasi Affidavit, (n 1) [18]-[19] and Exhibit ADB-1/18-108.
Between 10 March 2023 and the relisted hearing on 16 August 2023 the respondent pursued the validity of the costs agreement argument by the filing of their amended defence and in filing an outline of submissions on 14 August 2023.[18]
[18]Koutsimanis Affidavit (n 9) [27] Exhibit AK1/50-55 and [31] Exhibit AK1/70-87.
On 6 October 2023, the applicant filed its summons seeking assessment of its fair and reasonable costs of acting for the respondents in the County Court proceedings.
The parties agreed to the matter being heard in the Costs Court for the timetabling of the matter and the listing of a mediation before the Costs Registrar.[19]
[19]Consent Orders were filed with the Court dated 6 November 2023.
On 8 November 2023, Judicial Registrar Conidi made procedural orders referring the application for an extension of time to assess the costs to a Judge of the Supreme Court for determination pursuant to s 198(4) of the Uniform Law.
THE UNIFORM LAW
The relevant provision in question here is s 198. It provides:
(1)Applications for an assessment of the whole or any part of legal costs payable to a law practice may be made by any of the following—
(a)a client who has paid or is liable to pay them to the law practice;
(b)a third party payer who has paid or is liable to pay them to the law practice or the client;
(c)the law practice;
(d)another law practice, where the other law practice retained the law practice to act on behalf of a client and the law practice has given the other law practice a bill for doing so.
(2)An application under this section is to be made in accordance with applicable jurisdictional legislation.
(3)An application under this section must be made within 12 months after—
(a)the bill was given to, or the request for payment was made to, the client, third party payer or other law practice; or
(b)the legal costs were paid if neither a bill nor a request was made.
(4)However, an application that is made out of time may be dealt with by the costs assessor if the designated tribunal, on application by the costs assessor or the client or third party payer 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.
STANDING
The respondents argued that the applicant lacked standing to bring the application for an extension because the terms of s 198(4) of the Uniform Law provided for an extension application to be made by ‘the costs assessor or the client or third party payer who made the application for assessment’. It was argued that the application was impermissibly made by the law firm and not by a category of entity identified in s 198(4).
The respondents referred to the passage in Lin v WJ Legal (Aust) Pty Ltd[20] where Dixon J refers to the application being made by the client.
[20][2023] VSC 52, [4] per Dixon J.
It was argued that the role of the costs assessor is an administrative one and in referring the matter to this Court the Judicial Registrar was acting in his judicial capacity thus in making the referral he was acting not as a costs assessor by which s 198(4) would apply.
In exercising the administrative or mixed judicial/administrative task it was claimed the Judicial Registrar acted in error doing so without notice or inviting submissions.
To allow the routine referral of an out of time application made by a law practice to a Judge (as somehow being treated as a costs assessor), would bypass the legislative intent not to provide a routine pathway by a law practice.
I disagree with this analysis.
I agree with the analysis and procedural course of action which has been adopted by this Court in other recent cases such as DLA Piper Australia v Triclops Technologies Pty Ltd,[21] Eventus Ltd v Richens Pty,[22] and Peter Szabo Family Law Pty Ltd v Young.[23]
[21][2020] VSC 93 (‘DLA Piper’).
[22][2021] VSC 370 (‘Eventus’).
[23][2023] VSC 756 (‘Szabo’).
For the purposes of s 198(4) of the Uniform Law, the Costs Court is the ‘costs assessor’.[24]
[24]Supreme Court Act 1986 (Vic), s 17D(1(ea); Legal Profession Uniform Law Application Act 2014 (Vic), s 6 definition of ‘costs assessor’ (‘Uniform Law’); Gallin v SC Lawyers Pty Ltd [2020] VSC 80; DLA Piper (n 15) [41]; Eventus (n 16) [81]; Szabo (n 17) [4].
I adopt the reasoning of Ginnane J in Eventus[25] who rejected the argument based on the application having been made by a law practice and not a costs assessor. In rejecting the submission Ginnane J said:
First, I consider that there is a valid application for such an order before the Court. I apply the analysis of Wood AsJ in [DLA Piper] that s 198(4) applies because the Supreme Court is the ‘designated tribunal’ and the Costs Court, comprising the Judicial Registrar, is the ‘costs assessor’ for the purposes of that section. The application to extend time can be made on an application by the costs assessor, and granted by the Supreme Court if it is satisfied that it is just and fair to do so. The costs assessor, being the Judicial Registrar, referred the issue to a Judge. While Eventus issued the summons for taxation, it was the Judicial Registrar, as costs assessor, who referred to a Judge for determination the issue of whether the application for an assessment of legal costs should be dealt with after the 12‑month period.
[25]Eventus (n 16) [16]-[20], [28].
In Szabo, Watson J considered that for the purposes of s 198(4) the Costs Court constituted by JR Conidi was the ‘costs assessor’ and the referral by JR Conidi of an application for an extension of time to a Judge of the Supreme Court for determination enlivened his jurisdiction under s 198(4).[26]
[26]Szabo (n 17) [4].
I can see no difference or reason to distinguish the argument raised by the respondents here to those which were rejected by the Court in Szabo, Eventus or DLA Piper. The applicant, a law practice filed a summons for an assessment out of time. JR Conidi, as costs assessor referred the application to a Judge of the Supreme Court. A Judge of the Supreme Court, as the designated tribunal[27] has jurisdiction to determine whether it is fair and just for the application to be dealt with after the 12‑month period.
[27]Uniform Law (n 18) s 10(1), Table 2–Designated Tribunals.
The respondents’ submission that the decision or actions of the Judicial Registrar was administrative in character, required certain additional procedural steps to satisfy procedural fairness and that there was a failure to properly exercise that power, are inconsistent with the analysis set out above.
The respondents’ reliance on Lin v WJ Legal (Aust) Pty Ltd[28] does not persuade me to take a different view. I do not accept that the comments made by the Court in that case are binding, and in the context in which they were made are obiter.
[28][2023] VSC 52.
In conclusion, I reject the respondents’ submissions based on standing.
DELAY AND REASONS FOR DELAY
The period of time which has elapsed for compliance with s 198 of the Uniform Law is approximately 12 months.
The applicant argued that the expiry of the 12‑month period was occasioned by the lack of notice of the allegation that the applicant had breached its disclosure obligations. They submitted that the first occasion this defence was raised was on or around 10 March 2023[29] when the respondents sought leave to file an amended defence raising this allegation directly. This occurred approximately 11 months after the Magistrates’ Court proceeding had been filed and 5 months after the 12‑month period set by s 198 of the Uniform Law had elapsed.
[29]In fact it was squarely raised in the correspondence dated 9 March 2023, just prior to the Defence was filed: Koutsimanis Affidavit [24] Exhibit AK1/38-40.
There was a 3-month period between the issue being raised and the proceeding being listed for final hearing on 16 August 2023. At that hearing JR Keogh‑Barnes determined that the costs agreement was void and ordered the Magistrates’ Court proceeding be stayed.[30]
[30]Di Blasi Affidavit (n 1) [18]-[19] and Ex 1/108-109.
The summons for assessment was issued on 6 October 2023, a period just short of 12 months from the date required by s 198 of the Uniform Law.[31]
[31]That date being 25 October 2022.
Whilst the applicant might be criticised for not acting to seek a costs assessment once the issue of validity was squarely raised by the pleadings in the Magistrates’ Court, the delay was relatively short. On one view it might be said that whilst the validity of the costs agreement was in issue, no determination had been made on the matter. On the other hand, as the respondents assert it would be patently clear to any practising lawyer that there were a number of deficiencies in the costs agreement and in those circumstances any reasonable lawyer would have taken the view that the costs agreement would be held to be void, as in fact it was, when argued before the Judicial Registrar.
In addition, the respondents argued that the dissatisfaction with the costs agreement was raised even earlier than this point by the correspondence between the client and the law firm. The email dated 31 August 2021 from the client to the law firm refutes receipt of the costs agreement, denies it being signed and returned and denies any agreement to pay fees at the rate of $605 per hour.[32] These denials are repeated (in response to an email from the firm) on 3 September 2021 and reiterated in an email on 7 December 2021.[33]
[32]Koutsimanis Affidavit (n 9) Exhibit AK-1/13-14.
[33]Ibid, Exhibit AK-1/11-12.
The applicant took issue with the respondents’ denials and reiterated that the costs estimate was a fair one and that they had proof that the costs agreement was sent to the respondents.
The applicant, having received the defence filed on behalf of the respondents on 6 July 2022 proceeded on the basis that there was no allegation of non-compliance with disclosure obligations. On the basis of the pleadings, it was reasonable to assume the defence was to be based on the oral agreement/cost cap argument. At that stage the statutory time limit had not expired.[34]
[34]It expired on 25 October 2022.
The first hearing took place on 3 March 2023 and at that time the defence based on the validity of the costs agreement was directly raised. This date was 5 months after the expiry of the statutory time limit. The determination of the validity of the costs agreement occurred 5 months later on 10 March 2023.
Ultimately, the finding of the Judicial Registrar was that there was no valid costs agreement. The effect of no valid costs agreement means that the applicant does not have the benefit of the presumption that the costs charged were reasonable.
Consequently, the only way in which the claim for legal costs can be recovered is to undertake a costs assessment. This is the step which is now sought to be pursued.
The application for an assessment was made promptly, approximately 3 weeks later.
In my view, whilst an examination of the earlier correspondence raised issues of the acceptance of the costs agreement and its terms, the initial pleadings did not raise that issue which was ultimately raised by the amended pleadings and by this time the statutory time limit had expired. In an examination of the chronology as set out above I am satisfied that there is both an explanation for the delay and that the reasons given are not fatal to the application.
FUTILITY – MERITS AND UNREASONABLE CONDUCT
The respondent argued that the Court should consider the merits of the respective parties’ positions. The Koutsimanis affidavit sets out a number of matters which it was asserted showed the strength of the respondents’ position on its merits.[35]
[35]Koutsimanis Affidavit (n 9) [11]-15],[20]-[24] and the correspondence referred to therein and exhibited.
Whilst the guidance set out by Dixon J in Rohowskyj does not list the relative merits of a party’s case as a consideration explicitly it does not exclude consideration of the merits as a factor. On one view, consideration of futility may well embrace the merits of a party position, albeit at the extreme end of a merits consideration. If the legal position of an applicant was totally devoid of merit, it may well be said to be futile providing an extension of time. Equally, if the strength of the respondents’ defence was without merit, it may be a consideration to allow the extension of time as such would be consistent with fairness and justice.
I do not consider that the applicant’s case is so devoid of merit that it would be unfair and unjust to refuse the extension of time nor the respondents’ position so obvious that the applicant is bound or highly likely to fail. That said, it is not a matter for this Court to determine the merits of the substantive dispute in this application. The discretion to be exercised is whether it is fair or just in the circumstances to allow the extension of time for the assessment.
I am of the view that there are arguments to be explored from both sides.
It is not enough to rely on lack of compliance with time limits without more to persuade a court that it would not be just and fair to allow the extension of time for the assessment to be undertaken.
I acknowledge that the VLSBC declined to intervene in the costs dispute, the claim having been made in the Magistrates’ Court at that time.[36]
[36]See complaint made to the LSBC on 1 June 2022 per Koutsimanis Affidavit (n 9) [18] and Exhibit AK‑1/22-24.
There is good reason for time limits to be set. A delay in meeting a statutory deadline never leaves a law firm looking their professional best. Much was made by the respondents of a law firm meeting deadlines and upholding the law and the ethical obligations generally and under the Civil Procedure Act 2010 (Vic) to act efficiently and professionally. Whilst this card was somewhat overplayed, law firms are expected to know the law and to undertake their professional and legal obligations in a timely and proper manner.
However, I do not consider that this is a matter which is determinative of whether it is just and fair to allow the extension and thus allow the merits of the claim to be considered.
PREJUDICE
The respondents relied on the elapse of time, the risk of waning memory and the impact on evidentiary robustness and the delay in recovering significant costs already incurred in the Magistrates’ Court proceeding which has been stayed as matters going to their prejudice.
There was no specific example of how the evidence would be compromised. No doubt the passage of time affects everyone, applicant and respondents. I do not give this matter persuasive weight.
In respect of costs incurred in the Magistrates’ Court, I understand that at present there is no costs order made and as the proceeding is stayed the question of costs in that proceeding remains to be determined. This issue appears in these circumstances to be premature and of no significant import in the exercise of discretion I must determine. The respondents will have their opportunity to finalise the Magistrates’ Court proceeding, including any application for costs which they will no doubt pursue in the circumstances.
In respect of prejudice to the applicant, clearly non-payment of fees for work done is a prejudice suffered if that work done is justified. By providing an opportunity for them to prove their claim that prejudice will be removed. Equally, any argument that the respondents have as to the charges will be able to be litigated on its merits.
However, in order for that to occur an extension of time is necessary.
CONCLUSION
The trajectory of this dispute is unfortunate. It is clear to me that significant costs have been incurred on both sides over a relatively modest amount in dispute of just over $22,000.
There have been delays caused by procedural and forensic failures on both sides. Litigation can be like that. However, there is a dispute which must come to a conclusion. The applicant requires the indulgence of the court to grant an extension of time to proceed with an assessment which is a necessary precondition to the claim for fees being pursued, the Magistrates’ Court having found the costs agreement invalid. That does not mean there is no dispute as to fees owing, rather, it requires a different course to be pursued.
Whether on the merits there is any recovery of fees as claimed is not a matter for this Court to determine at this time.
I am satisfied on the material before me that there should be an extension of time as sought in the summons dated 28 September 2023.
I will make an order to that effect and reserve the question of costs of the application before me and direct that the parties make any submissions in writing on the question of costs within 7 days.
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