Peter Szabo Family Law Pty Ltd v Young
[2023] VSC 756
•14 December 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
S ECI 2023 02016
| PETER SZABO FAMILY LAW PTY LTD (in liquidation) AS TRUSTEE FOR THE GEORGE PETER SZABO FAMILY TRUST (ABN 68 103 907 416) | Applicant |
| v | |
| THOMAS YOUNG (a pseudonym) | Respondent |
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JUDGE: | WATSON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 December 2023 |
DATE OF JUDGMENT: | 14 December 2023 |
CASE MAY BE CITED AS: | Peter Szabo Family Law Pty Ltd v Young |
MEDIUM NEUTRAL CITATION: | [2023] VSC 756 |
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LEGAL COSTS – Application for assessment of costs – Application made out of time – Just and fair for the application for assessment to be dealt with – Application granted – Legal Profession Uniform Law s 198.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | S D Buchanan | Willams Winter Solicitors |
| For the Respondent | L Dawson | Castra Legal Costing Pty Ltd |
HIS HONOUR:
On 10 May 2023, the applicant issued a summons in the Costs Court for the assessment of costs in accordance with invoices on a range of dates from 17 September 2019 to 13 September 2021 (‘application for assessment’).
The application for assessment is out of time under s 198(3) of the Legal Profession Uniform Law (‘LPUL’).[1] The applicant seeks an extension of time in which to file the application for assessment.
[1]Which is schedule 1 to the Legal Profession Uniform Law Application Act 2014 (Vic) and pursuant to s 4, applies as if it were an Act.
Section 198(4) of the LPUL provides as follows:
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.
On 6 October 2023, Conidi JR referred the application for extension of time to a judge of the Court for determination under s 198(4) of the LPUL. I note that for the purposes of s 198(4) of the LPUL the Costs Court constituted by Conidi JR is the “costs assessor” and that the referral enlivens my jurisdiction under s 198(4).[2]
[2]DLA Piper Australia v Triclops Technologies Pty Ltd [2020] VSC 93, [41]–[43], [49]–[52]; Eventus Lawyers Pty Ltd v Richens [2021] VSC 370, [37].
In determining the application under s 198(4) of the LPUL I am required to consider three matters:
(a) the period of the delay;
(b) the reasons for the delay; and
(c) whether it is just and fair to permit the application for the assessment to be dealt with after the expiry of the period limited by the statue.[3]
[3]Rohowskyj v Stomyn & Co [2015] VSC 511, [3].
In the circumstances of this case, in determining what is just and fair, the parties agreed I should consider:
(a) any prejudice to the applicant; and
(b) any prejudice to the respondent.
In addition, the respondent submitted that:
(a) in considering the prejudice to the applicant, I should take into account that in contradistinction to the situation in Eventus Lawyers v Richens (‘Eventus’)[4] the applicant in this case did not seek disbursements only, but was seeking an assessment of its professional costs; and
(b) I should take into account the misconduct of the applicant in the course of the retainer.
[4]Eventus Lawyers Pty Ltd v Richens [2021] VSC 370.
For the reasons that follow, I have determined that it is just and fair to permit the application for assessment to be dealt with after the expiry of the period prescribed by s 198(3) of the LPUL.
Delay and explanation for delay
The summons was filed seven months and 27 days late. The period of delay is clearly not de minimis but equally as counsel for the respondent conceded, not unprecedented in terms of periods of extension which have been granted in other cases.
On balance, I have formed the view that the applicant’s explanation for the delay is reasonable in the circumstances. The circumstances of the delay in filing the summons are explained in an affidavit of Brent Lee Morgan, sworn 2 November 2023. Mr Morgan is a director of Rodgers Reidy (Vic) Pty Ltd. He is a registered liquidator.
Until 30 August 2022 the applicant provided legal services as trustee of the George Peter Szabo Family Trust (‘the Trust’) under the name Peter Szabo Family Law.
On 30 August 2022, Mr Morgan was appointed as administrator of the applicant under s 436A of the Corporations Act 2001 (Cth) (‘Corporations Act’). On 26 September 2022, a meeting of creditors of the company resolved that the company should be wound up and Mr Morgan was appointed a liquidator of the company pursuant to s 446A of the Corporations Act. The 12-month time limit to lodge a summons for assessment of the applicant’s legal costs expired on 13 September 2022, that is in the period between Mr Morgan’s initial appointment as administrator and his subsequent appointment as liquidator.
On 7 October 2022, Mr Morgan sent a letter on behalf of the applicant to the respondent demanding the sum of $311,599.20 on account of costs. On 12 October 2022, the respondent sent an email indicating that the amount owing was in dispute and that there was a signed agreement ‘contra your claims’. Following receipt of the email, Mr Morgan deposes to having investigated the file to determine the status of the underlying costs agreement between the applicant and the respondent. In the course of this review, Mr Morgan became aware of potentially inadequate costs disclosure to the respondent. Mr Morgan says and I accept that prior to the receipt of the 12 October 2022 email and his review of the file he had no reason to think that the expiry of the limitation period on 13 September 2023 would create any problem.
Between the months of October 2022 and February 2023 Mr Morgan deposes that, his staff, his solicitors and his costs consultant were heavily involved in attending to:
(a) another Costs Court proceeding which was returnable in October 2022;
(b) an application for him to be appointed the receiver of the Trust’s assets, which was issued in and listed for hearing in November 2022;
(c) preparing a statutory report to creditors which was due in November 2022;
(d) negotiating with another significant debtor client of the applicant whose family law proceeding in which the applicant had previously acted was still afoot and (it appeared) was nearing completion; and
(e) a County Court proceeding which was related to a complex family law proceeding (in which the applicant had previously acted) in the Federal Circuit and Family Court of Australia, in both of which proceedings the applicant’s debtor had an administrator appointed in respect of her affairs.
In those circumstances, Mr Morgan deposes that he did not instruct his solicitors and the costs consultant to engage with the respondent regarding the costs alleging owing until 13 February 2023.
The respondent submitted that:
(a) the applicant was represented by lawyers and a costs consultant from 12 October 2022 until the issue of the summons;
(b) it took four months after the receipt of the email of 12 October 2022 for Mr Morgan to give instructions to his lawyers and cost consultant to begin progressing the matter; and
(c) in the circumstances the period between October 2022 and February 2023 was a ‘most grievous period of delay’.
I do not think it is appropriate to characterise the delay between October 2022 and February 2023 as grievous. In the circumstances of a busy and complex liquidation involving multiple pieces of litigation, the failure to immediately attend to the costs in this matter whilst regrettable, is in my view completely understandable. The applicant has a reasonable explanation for this portion of the delay.
Between 13 February 2023 and 4 April 2023, those acting on behalf of the applicant and the respondent engaged in a series of without prejudice communications.
The respondent says that in February 2023 the appropriate course of action would have been for the lawyers acting for the applicant to issue a summons in the Costs Court to stop time running. That may well be so, but again I do not regard it as unreasonable in the circumstances for the applicant to have first tried to negotiate an outcome with the respondent prior to the issue of a summons.
Once the without prejudice communications between the parties had come to an end, Mr Morgan deposes that he, his staff, his solicitors and his costs consultant were again heavily involved in attending to:
(a) conducting the County Court proceeding (which included a mediation in April);
(b) further negotiations with the debtor referred to in paragraph 14(d) above prior to the issue of proceedings against them, in the light of the imminent expiry of a statute of limitation on 14 June 2023; and
(c) preparing and collating the initiating documents for this proceeding.
The respondent says that the delay between 3 April 2023 and the issuing of the summons on 10 May 2023 is a further ‘grievous’ period of delay. Again, in the circumstances which faced Mr Morgan as the liquidator of the applicant, I find the applicant has a reasonable explanation for the delay associated with that period of time following the cessation of ‘without prejudice’ discussions.
In all of the circumstances, I am satisfied that the applicant has a reasonable explanation for the delay in issuing its summons in the Costs Court and I do not regard the period of delay as unreasonable.
Prejudice to the applicant
Both parties submitted that in the exercise of my discretion I should consider the question of any prejudice to the applicant if the extension of time is not granted, though of course they differed in their views as to how this factor bore upon my determination.
The applicant’s submission was that it would suffer ‘immense’ prejudice if time is not extended for the reason that without such an extension, it will not be able to have its costs assessed at all. In response, the respondent drew my attention to various matters which on his contention would substantially reduce (perhaps to zero) the amount owing by the respondent on account of costs. Ultimately, though the respondent conceded that there is at least some prospect of prejudice to the applicant, if time is not extended but submitted that that prospect was not of ‘immense prejudice’.
I am plainly not in a position to determine whether the issues which the respondent raises will have the effect for which he contends, those matters will only ultimately be determined on a full assessment of the costs. I am persuaded that the applicant will suffer prejudice if the extension of time is not granted, that prejudice being the opportunity to have its costs (which may be substantial) properly assessed and any costs properly owing paid to it by the respondent.
On this aspect of the matter, the respondent also drew a distinction between the circumstances of this case and those which pertained in Eventus.[5]In Eventus, Ginnane J held that a significant factor in that case in determining the prejudice to the applicant was the fact that the amounts claimed were disbursements only and provided no direct benefit to the firm.[6] It is plain that the passage from Eventus on which the respondent places reliance, goes no further than to state a factor which was significant in that case. In this matter, the applicant seeks an assessment of its professional fees. As I have indicated, the applicant will suffer a prejudice if the extension is not granted and it cannot have those fees assessed.
[5][2021] VSC 370.
[6]Ibid [43].
In these circumstances, I regard the prejudice to the applicant if the extension of time is not granted as a matter which weighs in the balance in favour of granting the extension.
Prejudice to the respondent
The respondent submitted that the conduct of the applicant caused stress to him and diminished his trust in the legal profession. It was submitted that the respondent would suffer further stress if the application for an extension of time were granted because of the ongoing interactions which would be necessary regarding assessing the actual level of costs to which the applicant is entitled.
I accept that the applicant’s conduct has caused the respondent stress and I accept that if the application for an extension of time is granted, aspects of that stress will continue. I take this matter into account in my overall assessment of whether it is just and fair to allow the extension of time. Nonetheless, I am not persuaded that the prejudice which the respondent suffers is significantly contributed to by the delay in the issue of the summons. The matters to which the respondent points are largely matters which arise from, or are consequent upon, the conduct of the legal practice prior to the appointment of the administrator and prior to the expiry of the limitation period in s 198 of the LPUL. Overall, the prejudice to the respondent does not weigh heavily against the grant of an extension of time.
Misconduct during the course of the retainer
The respondent raised a series of matters which he said would constitute misconduct on the part of the applicant during the course of the retainer. The respondent submitted that in this regard, I should take into account not just matters occurring between the expiry of the limitation period and the issue of the summons, but matters occurring throughout the duration of the retainer. The respondent further submitted that the applicant should not be in any better position in relation to my consideration of the alleged misconduct because a liquidator has been appointed and the applicant is in effect being administered for the benefit of creditors, than it would have been if the applicant continued to be run by its former principal.
The alleged misconduct on the part of the applicant during the course of the retainer is serious, but these matters can be considered by the Costs Court in its consideration of the reasonable costs (if any) which the respondent owes the applicant. Further, as counsel for the applicant pointed out in his submissions, in the event that the Costs Court is of the view that the applicant has engaged in unsatisfactory professional conduct or professional misconduct it must refer those matters to appropriate regulatory authorities. In the circumstances, I do not consider the allegations of misconduct should lead to the refusal of the extension of time. In this regard, I have not taken into account the fact that the applicant is in liquidation. Had Mr Szabo still been the directing mind of the applicant, I would still have regarded the appropriate forum for consideration of the allegations of misconduct as being on the assessment itself.
However, for completeness, I should note that in an evaluative judgment about what is just and fair for the purposes of an extension of time, I would not necessarily regard it as inappropriate to have regard to the fact that the applicant is now in liquidation, that there is no suggestion of any misconduct on the part of the liquidator and that the applicant being in liquidation, any amount paid by the respondent will in effect be for the benefit of the creditors of the applicant and not its former principal who is alleged to have engaged in the misconduct.
Conclusion and costs
In all of the circumstances, I have determined that it is just and fair for the applicant to be permitted to have its costs assessed outside of the statutory time limit provided by s 198(3) of the LPUL. I will order that an extension of time be granted in accordance with s 198(4) of the LPUL.
The respondent submitted that he should have his costs in the event the applicant was granted the indulgence it seeks in this matter. I agree. Whilst I have rejected the respondent’s arguments opposing the extension of time, I do not regard his conduct in opposing the extension as unreasonable and in circumstances where the applicant seeks an indulgence arising from its own failure to lodge a summons within time, it is appropriate that it pay the respondent’s costs of this application.
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