Owens v Aitken Partners Pty Ltd
[2021] VSC 138
•26 March 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S ECI 2020 04413
BETWEEN
| SUE OWENS | Applicant |
| and | |
| AITKEN PARTNERS PTY LTD | Respondent |
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JUDGE: | Keogh J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 March 2021 |
DATE OF JUDGMENT: | 26 March 2021 |
CASE MAY BE CITED AS: | Owens v Aitken Partners Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2021] VSC 138 |
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COSTS – Assessment of costs – Request for assessment of legal costs paid by trustee administering applicant’s bankrupt estate – Application brought nine years since payment of final bill – Applicable statutory regime – Relevant period to bring review – Whether to extend time to review bills – Legal Practice Act 1996 (Vic) – Legal Profession Act 2004 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | In person | |
| For the Respondent | P Tatti (solicitor) | Aitken Partners |
HIS HONOUR:
In May 2005 the Federal Magistrates Court of Australia made a sequestration order appointing David Lofthouse as trustee of the applicant’s bankrupt estate (‘the Trustee’). At about the same time the Trustee engaged the law partnership Aitken Walker and Strachan to act for him in relation to the bankrupt estate. Aitken Walker and Strachan was acquired by, and became, Aitken Partners Pty Ltd in July 2008. Aitken Partners Pty Ltd is the respondent in this proceeding.
The respondent acted for the Trustee in legal proceedings and commercial transactions until the applicant’s bankruptcy was ultimately annulled in 2010. In total over $550,000 was paid from the applicant’s bankrupt estate by the Trustee to the respondent for legal costs.
In September 2020 the applicant filed a summons for taxation of costs charged by the respondent to her bankrupt estate. The issues to be determined on the summons are:
(a) What statutory regime applies to the application?
(b) Does the applicant have the right to review the respondent’s costs?
(c) Should the time to apply for review of the respondent’s costs be extended?
Background
The applicant was a solicitor for many years until 2006, practising principally in the area of family law.
Applicant’s evidence
The applicant made a brief affidavit in support of her application. She states that in 2005 she attempted to have the sequestration order set aside, but proceedings became protracted when her counsel and solicitor would no longer act for her from July of that year because she had no funds to pay legal fees. The applicant states she was then without legal representation, and conducted a number of legal proceedings representing herself, including Federal Court proceedings in which she sought to argue that certain assets which had been included in her bankrupt estate were subject to a trust, and complaints she raised in relation to the conduct of the Trustee, in which she failed to obtain orders in her favour. She states that she managed to find a solicitor, Mr Cull, to act for her in late December 2008.
The applicant states:
As a consequences of the conduct of the Trustee in 2008/2009, I was suffering from cancer and also a major depressive illness. The conducts of the Trustee and my inability to find legal help had caused me great anguish and continues to affect me.
The applicant states that during 2008 she underwent surgery, chemotherapy and radiotherapy over a number of months, from which she did not recover for approximately two years. Over the years since there have been a number of hospital admissions and additional surgery associated with her cancer treatment. The applicant states her cancer is now in remission, but her depressive illness prevents her from working, is very debilitating and requires that she receive regular medical treatment.
In relation to the bankruptcy annulment, Trustee’s costs and the respondent’s legal costs, the applicant states:
13.Mr Cull received from David Lofthouse in October 2010 a sum he required relating to settlement of my bankruptcy and its discharge of $1,130,000 million dollars in September 2010. He received no bill of costs or documents to justify the claim for costs and simply agreed to payment of the monies demanded by David Lofthouse. I do not have a copy of the final settlement documents as I have moved and can no longer find the documents. I have received no bills relating to Mr Lofhouse’s costs and have over the past few months requested copies of accounts that has been refused by Mr Caraffa who is now in charge of the office of CJL Partners.
14.I have received no advice or bills from David Lofthouse save for two at the beginning of his administration one of which I taxed. I have never received copies of his solicitor’s charges. Aitken Walker & Strachan Partners now Aitken Partners charged him approximately $600,000+.
The applicant states that in 2015 she made a request of the Trustee, which he refused, for copies of the respondent’s bills in order to consider taxing them. She states she made a further request of the Trustee more recently and that while she was provided with some information this did not include copies of the respondent’s bills. I note that the recent requests were directed to Mr Carrafa, a senior manager employed by the Trustee.
The applicant states that a request she made after annulment of her bankruptcy to the Australian Financial Security Authority (AFSA) for taxation of the Trustee’s costs was refused on the basis the application was not made within 60 days.
Respondent’s evidence
Mr O’Brien, who is a Principal of the respondent, acted for the Trustee in relation to the bankrupt estate. Mr O’Brien made two affidavits on this application in which he gave a summary of legal proceedings and transactions in which the respondent acted for the Trustee, and set out some of the circumstances which have occurred since annulment of the bankruptcy in 2010. The following is a summary of Mr O’Brien’s evidence.
Shortly after the sequestration order was made in May 2005, the applicant commenced the first of a number of legal proceedings against the Trustee.
In May 2005 the applicant filed a notice of motion with the Federal Magistrates Court seeking to set aside the sequestration order, or alternatively, an order that her bankruptcy be annulled pursuant to s 153B of the Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’) on the basis that she was solvent. That application was discontinued with costs in October 2005.
An application to adjourn taxation of the Trustee’s costs was dismissed with costs in February 2007.[1]
[1]Owens v Lofthouse [2007] FMCA 238.
I note the applicant represented herself in that proceeding.
In May 2006 the applicant applied to remove the Trustee and sought review of various decisions which had been made in relation to proofs of debt which had been admitted. In July 2007 the applicant raised complaints that the Trustee had not appropriately applied certain funds held in a bank facility, and for release of funds which she alleged belonged to third parties. That application was settled in February 2008.
In April 2008 the applicant filed an application seeking an inquiry into the Trustee’s conduct pursuant to s 179 of the Bankruptcy Act. In July 2008 the applicant applied to delay the sale of various properties that had vested in the bankrupt estate until after a preliminary hearing of the inquiry into the Trustee’s conduct. In a separate proceeding the Trustee applied for an order permitting execution of certain documents relating to the sale of various properties. Subsequently the Trustee further applied to restrain the applicant from engaging in conduct which would interfere with the sale of various properties. Later in 2008 orders were made in the Federal Magistrates Court dismissing the applicant’s application and granting the orders sought by the Trustee. Subsequent applications, including by the applicant to reinstate the proceeding and for orders that the Trustee fund her lawyers for discovery, were dismissed.[2] In October 2009 a further lengthy judgment was delivered in the Federal Magistrates Court in which applications by the applicant were dismissed with an order that the Trustee’s costs be paid from the bankrupt estate.[3]
[2]Corrigan v OwensandLofthouse v Owens [2008] FMCA 1179; Corrigan v Owens (No 2) [2008] FMCA 1370.
[3]Corrigan v Owens [2009] FMCA 1009.
I note that at some hearings the applicant represented herself, while at others she had legal representation.
After the sequestration order was made the applicant asserted that four properties held in her name were not beneficially owned by her but were owned by a trust. As a result the Trustee issued proceedings in September 2006 in the Federal Magistrates Court seeking various declarations and orders pursuant to ss 58 and 116 of the Bankruptcy Act. When the matter came on for hearing the Court dismissed the applicant’s application to restrain counsel briefed for the Trustee from appearing.[4] Subsequently judgment was delivered in favour of the Trustee.[5] In December 2007 the applicant’s appeal to the Federal Court of Australia was dismissed.[6] The applicant applied for special leave to appeal to the High Court, and to the Federal Court for a stay pending hearing and determination of the special leave application. In May 2008 the special leave application was dismissed.[7]
[4]Lofthouse v Baxter [2007] FMCA 435.
[5]Lofthouse v Baxter (No 2) [2007] FMCA 1481.
[6]Owens v Lofthouse [2007] FCA 1968.
[7]Owens v Lofthouse [2008] HCATrans 216.
I note the applicant was represented by counsel at hearings in relation to the trust dispute.
When the sequestration order was made in May 2005 the applicant was involved in a proceeding in the Supreme Court of Victoria against a former client for recovery of fees in excess of $140,000. The Trustee was required to make an election as to whether to continue an appeal which the applicant had initiated in the Court of Appeal. In June 2005 the Trustee elected to continue the proceedings but eventually discontinued the appeal in August 2006.
In the latter part of 2009 and early 2010 the applicant and the Trustee were involved in ongoing discussions and negotiations for the applicant to pay out her bankrupt estate, in which the applicant was represented by Mr Cull. In March 2010 the applicant executed a Deed of Release and Indemnity formalising the arrangement for the annulment of her bankruptcy. In April 2010 the applicant delivered to the Trustee a cheque for approximately $1.13 million, which was sufficient to annul her bankruptcy. In the course of negotiations the respondent provided to the applicant information about the fees, costs and expenses in relation to her bankrupt estate. The bankruptcy was annulled in September 2010.
I note the operative parts of the Deed include:
1.In consideration of the release and indemnity granted by Owens to the Trustee by this Deed the Trustee hereby agrees that he will issue a certificate of annulment to Owens after payment of sufficient funds to him to pay out the estate in full and upon the Trustee completing his obligations and duties in the estate.
…
5.Each party acknowledges that it has had a reasonable opportunity to obtain independent legal advice about the nature, effect and extent of this Deed before signing it.
The applicant executed the Deed, witnessed by Mr Cull.
In the period of the applicant’s bankruptcy the Trustee prepared reports to creditors, which contained detail of legal costs being incurred by the Trustee to administer the bankrupt estate, each of which was provided to the applicant. By way of example I note the Trustee’s summary of receipts and payments as at 21 April 2010 had an entry for legal fees to that date of $505,402.96.
Following the annulment the applicant raised some queries with the Trustee concerning her bankrupt estate. The Trustee responded by a letter to the applicant dated 2 September 2010, which reads in part:
2.A final account of receipts and payments will be made available to you upon the annulment of your first bankrupt estate. Since the commencement of your bankruptcy, all receipts and payments in the estate have been disclosed in our reports to creditors. As you are aware the most recent report issued to creditors is dated 22 April 2010. A copy of this report is again enclosed for your attention.
…
4.Details of my remuneration costs and expenses, including legal fees incurred for the purpose of administering your first bankrupt estate are readily available from my reports that have been issued to your creditors and yourself throughout the course of your bankruptcy.
In June 2011 the applicant issued a further proceeding in the Federal Court of Australia against the Trustee seeking a further inquiry. In September 2011 that proceeding was discontinued by the applicant.
Mr O’Brien states:
43.During the period between May 2005 and September 2011, the legal work undertaken in relation to the bankrupt estate of the Applicant was substantial, complex and time-consuming. The work involved thousands of hard copy documents and electronic records. The hard copy documents remaining in the office were placed into off-site storage a number of years ago.
44.As the work was conducted between 10 and 15 years ago, I do not believe that all of the material was captured and stored electronically (as it is today). In preparing the above background information I have not attempted to review in detail the electronic records held by Aitken Partners in relation to the bankruptcy, as this would most likely take a great deal of time. Nor have I retrieved from the firm's off-site archival storage facility hard copy records still retained by Aitken Partners in relation to the bankrupt estate (which I refer to below).
In December 2015 the applicant lodged a complaint against the respondent with the Legal Services Commissioner. The complaint read in part:
Until 2010 the above firm acted for my Trustee in bankruptcy and charged $600,000 in legal fees. I have just become aware that I can tax those fees which I have had to pay and have requested copies of the accounts I have never received.
I was only aware of their fees in 2013 and the amount.
I have requested copies of the accounts and response has been to ask their client.
Since the fees were charged to me I have every right to those accounts and the letters to their client has been ignored.
The delay in receipt of copies of the bills is delaying my attempts to have the bills taxed.
In the same month the Legal Services Commissioner determined to close the complaint.
From late 2019 and throughout 2020 the applicant corresponded with the Trustee demanding to be provided with documents she described as the final settlement statement, and documents setting out debts and fees. In response the Trustee provided copies of a transaction details report and a Final Account of Receipts and Payments. Mr O’Brien states that all work performed for the Trustee by the respondent was charged on a time basis, based on the hourly rates of the individual practitioners performing work.
Prejudice
Mr O’Brien states the electronic records held by the respondent in relation to the applicant’s bankrupt estate are not a complete and accurate record of the work performed, because in past years electronic files maintained by the respondent in respect of a matter did not contain all documents evidencing work undertaken. Because of changes in the firm’s document management system over time and issues with the document management system, including a major system failure which occurred in late 2018, Mr O’Brien is uncertain whether the respondent retains a complete copy of historical electronic files going back to 2005 in respect of the applicant’s bankrupt estate.
Mr O’Brien states that the respondent has a system of destroying hard copy files after the expiration of a seven-year holding period from completion or termination of engagement. Mr O’Brien states that a large number of boxes of documents relating to the applicant’s bankrupt estate are still held in storage but that hard copy documents in respect of some matters have been destroyed. Without attending the storage facility and examining all of the retained hard copy documents Mr O’Brien states it is not possible for him to determine the extent to which records still exist and are complete. If the application is granted the respondent would be required to retrieve and review a large volume of hard copy file material from offsite storage. Mr O’Brien states that the passage of time will make it more difficult to identify what work was done by reference to the supporting file documents that remain in existence.
Relevant provisions and authorities
The respondent was first instructed by the Trustee in relation to the bankrupt estate in May 2005, and performed the work for which costs were billed between May 2005 and 2010.
The Legal Practice Act 1996 (Vic) (‘1996 Act’) was in force when the respondent first received instructions from the Trustee. Part 4 of the 1996 Act deals with legal costs.
Relevant parts of the Legal Profession Act 2004 (Vic) (‘2004 Act’) came into operation on 12 December 2005. Costs disclosure and review is dealt with by pt 3.4 of the 2004 Act. Schedule 2 to the 2004 Act contains transitional provisions dealing with the application of the Act. Clause 3.1(1) of sch 2 provides:
Subject to sub-clause (2) and clause 3.2, Part 3.4 of this Act applies to a matter if the client first instructs the law practice on or after the commencement day and Part 4 of the old Act continues to apply to a matter if the client first instructed the law practice in the matter before the commencement day.
Accordingly, pt 4 of the 1996 Act will apply to any matter in which the Trustee first instructed the respondent before 12 December 2005, and the 2004 Act will apply where instructions were first received in a matter on or after that day. What constitutes a matter will depend on the terms of the relevant costs agreement and the surrounding circumstances.[8] The word ‘matter’ is broad and may cover work in relation to potential or actual litigation in a number of proceedings, and non-litigious work.[9]
The 1996 Act
[8]Marriner v Meerkin & Apel [2019] VSC 36, [44]–[45].
[9]Ibid [49].
Part 4 of the 1996 Act is titled ‘Information and Legal Costs’, div 3 of pt 4 deals with costs agreements, and div 5 with assessment of legal costs. Section 101, which is within div 3, concerns the effect of costs agreements:
(1)Subject to this Division and Division 4, a costs agreement may be enforced in the same way as any other contract.
(2)To the extent that it provides for legal costs to be paid according to a practitioner remuneration order or scale of costs of a court or tribunal, a costs agreement is subject to assessment under Division 5.
In Marriner v Meerkin & Apel,[10] Wood AsJ said of the effect of this provision:
Under the 1996 Act there can only be an assessment of costs that are the subject of a costs agreement ‘to the extent that it provides for legal costs to be paid according to a practitioner remuneration order or scale of costs of a court or tribunal’. In other words, if the Costs Agreement provides for all work by the practitioners to be costed on hourly rates it cannot be assessed by the Costs Court.[11]
[10]Ibid.
[11]Ibid [10] (citations omitted).
If div 5 of pt 4 of the 1996 Act applies to a costs agreement, s 116 deals with the circumstances in which a court may order assessment of costs:
(1)The Supreme Court, on the application of a person referred to in section 115(1) or the legal practitioner or firm, may order—
(a)that the bill of costs be assessed by the Taxing Master;
(b)that the legal practitioner or firm not commence or continue any proceedings to recover the legal costs the subject of the bill until the assessment is completed;
(c)unless the applicant was the person to whom the bill was given, that the legal practitioner or firm give a copy of the bill to the applicant on payment of the costs of the copy.
…
(3)Except in special circumstances, the Court must not order that a bill of costs be assessed if the application under sub-section (1) was made—
(a)after a judgment has been given in favour of the legal practitioner or firm for the recovery of the legal costs the subject of the bill; or
(b)more than 12 months after the bill was given or payment was demanded (as the case may be) by the legal practitioner or firm.
…
(5)If a bill of costs (other than an interim bill) has been paid, the Court may order the assessment of the bill only in special circumstances and in any event no later than 12 months after the payment.
The 2004 Act
Costs disclosure and review is dealt with by pt 3.4 of the 2004 Act, and div 7 within that Part deals with costs reviews. Applications by clients for costs review are governed by s 3.4.38, which provided when the 2004 Act first came into operation:
(4)An application under this section must be made within 60 days after the bill was given or the request was made or the costs were paid (whichever is earlier or earliest).
(5)However, the Taxing Master must deal with an application made out of time, unless the Taxing Master considers that the law practice has established that to do so would, in all the circumstances, cause unfair prejudice to the law practice.
The Legal Profession Amendment Act 2007 (Vic) (‘2007 Amendment Act’), which came into operation on 9 May 2007, made relevant amendments to s 3.4.38:
(5)An application by a client or third party payer for a costs review under this section must be made within 12 months after—
(a)the bill was given or the request for payment was made to the client or third party payer; or
(b)the costs were paid if neither a bill was given nor a request was made.
(6)However, an application that is made out of time, otherwise than by—
(a)a sophisticated client; or
(b)a third party payer who would be a sophisticated client if the third party payer were a client of the law practice concerned—
may be dealt with by the Taxing Master if the Supreme Court, on application by the Taxing Master or the client or third party payer who made the application for review, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for review to be dealt with after the 12 month period.
Section 3.4.38, as amended, provides for a single period in which to seek review of legal costs,[12] which commences either on a bill being given or a request for payment being made, and if neither of these events occurs, the costs being paid.[13] The applicant bears the onus to persuade the Court that the discretion to extend the time for review of the costs should be exercised.[14]
[12]Mackie & Staff Pty Ltd v Khor & Burr [2013] VSC 696, [58] (McMillan J).
[13]Viscariello v Oakley Thompson & Co Pty Ltd [2012] VSC 351, [21] (Ferguson J).
[14]Androvitsaneas v Tartaglia & Associates [2016] VSC 361, [7] (Ginnane J).
Relevant matters to consider on an application to extend the time for review include the extent of and reasons for delay, the applicant’s knowledge of his or her rights, whether there is evidence that the costs may be excessive, prejudice to the applicant if time is not extended, whether the client has paid the bill without objection, and prejudice to the respondent.[15]
[15]Ibid [8] (Ginnane J); Tomasevic v Nowicki Carbone [2015] VSC 302, [11] (Emerton J); Rohowskyj v S Tomyn & Co [2015] VSC 511, [5] (J Dixon J).
The respondent acted for the Trustee in a number of proceedings relevant to the bankrupt estate, some of which involved challenges by the applicant to the sequestration order and to the actions of the Trustee, and others to claims by the applicant that certain assets did not form part of the bankrupt estate; commercial transactions relating to the sale of assets; and negotiation of the agreement to annul the bankruptcy. The respondent has not at this stage undertaken the considerable task of reviewing its files to identify the costs agreement and other retainer documents so that it can be determined whether the respondent acted in a single matter, that is, the bankrupt estate or, if the respondent acted in multiple matters, when instructions were first received in each matter. It is possible that all of the files conducted by the respondent for the Trustee were not within the one matter, and that instructions were first received in a matter or matters after the 2004 Act came into operation.
Submissions
Applicant
Because all instructions were received and work undertaken by the respondent on the bankrupt estate in the period 2005 to 2010 the 1996 Act applies. That Act provides for no time limits for taxation of legal costs.
The applicant has not been given copies of the respondent’s bills or details of the costs charged. During negotiations for annulment of the bankruptcy the applicant’s solicitor was not provided with a breakdown of the sum required by the Trustee, or particularisation of the respondent’s fees. In that period the applicant’s solicitor received all correspondence from the Trustee, and the applicant was unaware of the totality of fees paid to the respondent for some years. If the 2004 Act applies, and there is a 12-month period to seek review of the respondent’s costs, then in circumstances where the Trustee and the respondent have refused to produce copies of the bills of costs, and the costs agreements on which they are based, time has not commenced to run. Alternatively, the refusal to provide copies of relevant documents is outrageous and a significant consideration to the question of fairness and whether time should be extended in the light of her history of illness and immediate action when aware of her rights.
Between 2005 and 2009 the applicant had no solicitor, and no income to pay legal fees. The applicant had no knowledge of the capacity to have the costs of the respondent taxed until shortly before the filing of this application, and believed because the matter was an insolvency the Trustee and his costs were controlled by the AFSA. The applicant received no advice from her solicitor from 2009 to 2011 of any other means of challenging the respondent’s costs.
From 2005 to 2020 the applicant made many complaints to the AFSA about the conduct and charges of the Trustee. The Court should take into account the applicant’s past attempts, and the response of the AFSA to requests for documents and taxation of fees.
By 2006 the applicant suffered a major depressive illness due to the stress caused by her insolvency. She continues to receive treatment for depression, which includes use of medication which impairs her cognitive function. Since 2009 the applicant has required treatment for cancer, in respect of which the prognosis was uncertain. The applicant’s ill health is an important factor explaining the delay in seeking a review of the respondent’s costs. The applicant has been preoccupied with the need for further medical treatment requiring surgery three years ago and the associated hospitalisation and recovery. Since 2010 the applicant has also been preoccupied with litigation that resulted in her home being sold, from which she received no funds.
The respondent is not at any disadvantage due to the lateness of this application. Its files are in storage, and there should be more than sufficient documents to undertake an itemised account. No missing documents have been identified. All time costing would have been recorded on sheets on the files, which will be available. It is irrelevant if members of staff have since left the respondent firm. It is not relevant to consider the time and effort associated with a review, or complications in relation to the refund of costs which might occur.
The costs agreement on which the respondent’s fees are based has not been provided to the applicant or to the Court. The nature of a costs agreement is to allow solicitors to charge at a rate far greater than an applicable scale of costs, and is evidence of excessive charges.
In circumstances where the applicant had a history of serious illness and was not aware of her right to review the respondent’s costs, and having regard to the conduct of the Trustee and the respondent, the application should be granted.
Respondent
The respondent was engaged by the Trustee in May 2005. Accordingly, work that was performed in accordance with that initial retainer must be governed by the 1996 Act. Further retainers which came into existence as matters involving the applicant progressed may, depending on the date on which instructions were first given, be governed by the 2004 Act.
Division 5 of the 1996 Act, pursuant to which the Supreme Court may order assessment of costs, does not apply if the costs agreement provides for all work by the practitioners to be costed on hourly rates.[16] As a time costing basis was used there can be no assessment of any costs which are subject to the 1996 Act.
[16]Legal Practice Act 1996 (Vic), s 101(2); Marriner v Meerkin & Apel (n 8) [10].
The applicant, as a third party payer of legal costs, would have been able to seek taxation of costs charged by the respondent to the Trustee in respect of any matter to which the 2004 Act applied. However, the 2004 Act required that any application for review of costs by the applicant be made within 12 months after a bill was given or a request for payment was made, or the costs were paid. At the latest, the triggering event which caused time to run occurred on or about 1 April 2010, when the applicant paid sufficient funds to the Trustee to annul her bankruptcy. As a result the applicant’s right to apply for a costs review expired in April 2011.
The applicant bears the onus of satisfying the Court that it is ‘just and fair’ to extend the time to make the application.[17]
[17]Androvitsaneas v Tartaglia & Associates (n 14), [7].
The application is being made almost a decade after the time limit for bringing it expired. The delay alone warrants the application being refused. The applicant has not provided a sufficient explanation for the delay. She is a very experienced former solicitor, including in the area of litigation, and was aware of her ability to have costs taxed at all relevant times. She made a complaint to the Legal Services Commissioner in December 2015, and had previously sought part taxation of the Trustee’s remuneration. The applicant was made aware of the legal fees which she now seeks to tax by being provided copies of the Trustee’s reports to creditors, as part of negotiations to annul her bankruptcy, and by the Trustee’s Final Account of Receipts and Payments. In all the circumstances there can be no proper or adequate explanation for the significant and excessive delay in bringing this application.
It is accepted that the applicant has suffered serious ill health at times since the bankruptcy. However, it is clear those health issues have not prevented the applicant pursuing her rights in various proceedings and with different authorities. The applicant’s ill health or medical condition is not an adequate explanation for the length of delay in seeking to review the costs.
While a significant amount was paid for legal fees, Mr O’Brien’s evidence makes clear that there were numerous applications and proceedings commenced by the applicant which substantially increased the legal costs of administering the bankruptcy. Given the number of proceedings, the years which they spanned and the issues which arose the Court should have no prima facie concern about the quantum of costs involved. The Trustee is a professional, well accustomed to engaging lawyers, from which the Court should infer, if there was any suggestion the costs were excessive, that the Trustee would have taken steps to deal with the matter.
The significant prejudice which the respondent would face if the application were granted includes:
(a) The records of work done are now incomplete because some files have been routinely destroyed.
(b) The elapse of time since the work was undertaken, the unavailability of lawyers who performed part of the work, and the sheer volume of work undertaken present difficulties in the preparation of material for taxation, particularly with respect to justifying time entries and providing more detail of the work performed.
(c) Given the sheer volume of legal work conducted over a number of years which is the subject of the proposed taxation, the time involved attending to even a partial taxation would be very substantial.
(d) To the extent any costs were taxed off, they would need to be repaid, which raises the question of who would be entitled to that amount. Further, the funds were received by the respondent over 11 years ago, and it would be unfair for it to need to make provision for those fees at this time.
Analysis
The applicant’s primary position in final oral submissions was that the 1996 Act applied, although she accepted the respondent’s contention that the 2004 Act may apply if there was a matter or matters where instructions were first received by the respondent on or after 12 December 2005.
The respondent first received instructions from the Trustee in May 2005. I infer those instructions were to perform legal work for the Trustee in relation to the bankrupt estate. It is possible the legal work was all performed by the respondent on a single retainer in respect of one matter — that is, administration of the bankrupt estate. Alternatively, if the respondent acted in multiple matters for the Trustee, it is also possible instructions were first received in respect of each matter before 12 December 2005.
However, it is also possible that instructions were first received by the respondent from the Trustee in one or more matters which are the subject of the legal costs in dispute on or after 12 December 2005. The provisions of the 2004 Act will apply to the application for review insofar as it relates to any matter in which instructions were first received after the 2004 Act came into operation.
The result is:
(a) some, and perhaps all, matters to which the application for review relates will be governed by the 1996 Act; and
(b) it is possible that some matters which are the subject of the application for review will be governed by the 2004 Act.
The 1996 Act
For the following reasons the application for review must be dismissed insofar as it relates to a matter or matters governed by the 1996 Act.
First, the legal costs were not paid according to a practitioner remuneration order or scale of costs of a court or tribunal. As Mr O’Brien stated the legal costs were charged on an hourly rate, which I infer was pursuant to a costs agreement between the respondent and the Trustee. As a consequence, the effect of s 101(2) of the 1996 Act is that div 5 of pt 4 of that Act, which governs assessment of legal costs, does not apply.
Second, all bills of costs to which the application relates had been paid by 2010. The effect of s 116(5) of the 1996 Act is that there is no power to order that a bill of costs be assessed later than 12 months after payment of a bill. Therefore if I am wrong, and div 5 of pt 4 of the 1996 Act does apply to the bills rendered by the respondent, the time to apply for assessment of those bills has expired, and cannot now be extended.
Third, if the above analysis regarding the operation of ss 101(2) and 116(5) of the 1996 Act were incorrect, I would conclude, for reasons which follow, that the applicant has not established that special circumstances exist which justify the extension of time she seeks to review the costs.
I conclude the application for review should be dismissed to the extent it relates to matters governed by the 1996 Act.
The 2004 Act
The applicant had the right to apply for review of the costs in respect of any matter governed by the 2004 Act.
The precise date on which the time for review commenced to run is not clear. It is probable that the costs to which the application relates were paid by around the time of annulment of the bankruptcy in April 2010, or in the following months. I conclude that the time to apply for a costs review expired in respect of most if not all of the costs in around mid-2011. There has been a very considerable delay of over nine years by the applicant in seeking to review the respondent’s costs.
The main reason for delay proffered by the applicant is her ill health. While the applicant’s ill health may at times have caused her some restriction, it did not, over the period since 2005, prevent her from engaging in numerous court proceedings and with relevant regulatory authorities, with and without legal representation. Beyond the matters to which I have already referred there are two further examples. In April 2014 the applicant represented herself in this court in proceedings in which she sought leave to appeal an order of the Costs Court made in relation to a taxation proceeding which she commenced by summons.[18] The trial judge described the background to the dispute:
1… In the Costs Court, Wood AsJ ordered that she pay the costs of the defendant (‘OT’), her former solicitors, fixed in a sum of $16,000 and calculated on an indemnity basis. OT had acted for Ms Owens from in or about March 2011 to on or about 17 May 2013 in relation to her claims in the County Court against her former trustee in bankruptcy, former barristers and a former solicitor.
2I accept the evidence of Jeremy Scott Broadbent, the solicitor employed by OT with the general conduct of Ms Owens’ litigation, that he viewed her claims were as ‘substantive and complex’ and involving the assessment of a great number of documents. There had been a six-day trial in the County Court and judgment had been handed down on 1 February 2013. Ms Owens largely failed to establish her case. OT acted for Ms Owens in commencing an appeal against the judgment. The firm ceased to act with leave of the Court of Appeal in the context of Ms Owens’ alleged breach of funding commitments made to it.[19]
[18]Owens v Oakley Thompson & Co [2014] VSC 198.
[19]Ibid [1]–[2] (citations omitted).
In June 2014 the applicant represented herself as a defendant in proceedings in the County Court brought against her by AF&L First Mortgages Ltd claiming possession of a property and payment of a loan amount.[20] In a judgment delivered in that proceeding the trial judge stated:
[20]AF&L First Mortgages Ltd v Owens [2014] VCC 1190.
Having had an opportunity to observe the defendant both in and outside the witness box, she generally presented, consistent with her extensive legal experience, as an intelligent, astute person with no apparent difficulty in looking after her own interests.[21]
And in relation to the relevance of the applicant’s ill health to the issues in that proceeding the trial judge said:
Nevertheless, although it might be accepted that the defendant was suffering from some depression at the time of taking the loans the subject of this proceeding, there is no objective medical evidence to suggest that this ill health affected her ability to make rational decisions.[22]
Medical evidence has not been tendered in this proceeding establishing when, and to what extent, the applicant’s ill health impaired her capacity to make rational decisions, pursue her rights, or engage with regulations, authorities or participate in proceedings. My observations of the applicant accord with those of the trial judge in the AF&L First Mortgages Ltd proceeding.
[21]Ibid [54].
[22]Ibid [62].
After considering all the circumstances of this case, I do not accept that the applicant’s ill health is an adequate explanation for the extent of her delay in making this application.
I reject the applicant’s submission that what she contends was lack of knowledge until recently of her right to review the respondent’s costs is a relevant consideration. First, the applicant was a solicitor for some decades practising in an area of litigation. I infer that in her practice she would have had general knowledge of the 1996 Act, the need to provide information to clients in relation to costs, and the potential for disputed costs to be subject to taxation. Second, the applicant was legally represented in some of the proceedings conducted in the period 2005 to 2009, and in the process of negotiation for annulment of her bankruptcy. The Trustee’s fees, which included the respondent’s costs, were a relevant consideration at the time. The applicant was in a position to obtain advice as to her rights to review the respondent’s costs. Third, between March 2011 and May 2013, the applicant was represented by Oakley Thompson in matters including claims against the Trustee. The subject matter of Owens v Oakley Thompson & Co[23] was taxation of her former solicitor’s costs, conducted by Wood AsJ, pursuant to the 2004 Act on a summons issued by the applicant. Fourth, the applicant was aware of her right to tax the respondent’s fees when she lodged a complaint with the Legal Services Commissioner in December 2015. I conclude the applicant was aware of the subject matter governed by the 1996 Act and the 2004 Act, in particular the right to have costs assessed. Further, the applicant had access to advice from Mr Cull, Oakley Thompson, and the other lawyers who represented her at different times.
[23]Owens v Oakley Thompson & Co (n 18).
While I accept that the applicant sought copies of the respondent’s bills of costs in 2015, and again in 2020, and that these have not been provided, I do not accept that the applicant was unaware of the amount of the costs, that the failure to provide the bills gave rise to a significant issue of fairness, or was a significant impediment to the applicant making this application. One of the main reasons very significant legal costs were incurred by the Trustee was the legal proceedings which were either commenced by the applicant, or made necessary by her conduct. The applicant was a party to those proceedings, and would have appreciated that very significant legal costs were accumulating. If there was any doubt about that matter, the applicant received the regular creditors’ reports and a final report in relation to the bankruptcy from the Trustee, which gave some detail of the costs. Further, the applicant was represented when annulment of the bankruptcy was negotiated on the basis of a payment which took into account the respondent’s costs. The applicant’s complaint to the Legal Services Commissioner in 2015 demonstrates she was aware that the respondents had charged approximately $600,000 in legal fees. The applicant has commenced this application for review without having received copies of the respondent’s bills and costs agreements. I conclude she could have commenced the application for review in 2010 or 2011 when she was aware of the respondent’s legal costs, or at latest in 2015 when she was undeniably aware of her right to a taxation.
I do not accept that attempts by the applicant to engage with the AFSA to review the conduct of the Trustee or tax the Trustee’s fees is a material consideration favouring extending time to make this application. There is no evidence before me of an attempt by the applicant to engage continuously with the AFSA over the period from 2010 to 2020. The evidence is that when she attempted to approach the AFSA in 2010, and again in 2020, the applicant was quickly rebuffed.
I accept that the respondent would be significantly prejudiced if the application to review its costs were granted at this late stage. In Tomasevic v Nowicki Carbone,[24] Emerton J said:
There are good reasons why the legislation has imposed a 12 month time limit on making an application for costs review. Legal practitioners are entitled to organise their affairs on the basis that a review is unlikely if requested more than 12 months after the bill has been given.[25]
Justice Emerton’s comment recognises the general prejudice that a legal practitioner will suffer if an application to review costs is allowed years after a bill has been delivered and the costs paid. Further, in this case, I accept that the evidence from Mr O’Brien demonstrates specific prejudice. Because of the time which has elapsed, the files on which the bills of costs were delivered are not immediately to hand and are unlikely to be complete. The task of itemising and justifying costs will clearly be more difficult given the elapse of time and the likely diminished memory of relevant events. As a consequence, the cost of undertaking the task of reviewing the bills is likely to be greater and less effective than it would have been had the application for review been made in 2010 or 2011. I conclude the respondent is likely to be at significant disadvantage if the application for review is allowed.
[24]Tomasevic v Nowicki Carbone (n 15).
[25]Ibid [17].
Taking into account all of the above matters I am comfortably satisfied that it is neither just nor fair to extend the time for the application for review to be dealt with.
The respondent addressed in submissions the possibility that the 2004 Act as first enacted might apply to a legal costs bill delivered before the 2007 Amendment Act came into operation. It is not necessary that I determine which version of the Act applies. It is sufficient that I conclude, for reasons already stated, that if it were necessary for the respondent to establish it would cause unfair prejudice to it if the application were granted, then, in the circumstances of this case, that onus has been discharged.
Conclusion
I have concluded that the applicant’s summons should be dismissed. I will hear from the parties as to any consequential orders.
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