RAMON & Z LAW FIRM
[2012] FamCA 552
FAMILY COURT OF AUSTRALIA
| RAMON & Z LAW FIRM | [2012] FamCA 552 |
| FAMILY LAW - COSTS - Between solicitor and client - Notice Disputing Itemised Costs Account – Setting aside of costs assessment order – Leave to file and serve a Notice Disputing Itemised Costs Account out of time – Where the husband alleges negligence and/or incompetence by the solicitor – Discretion – Inadequate explanation for delay – Hardship to the husband – Prejudice to the solicitor – Where the Court should err on the side of caution and grant the indulgence to file out of time |
| Family Law Rules 2004 (Cth) – r 1.14; Schedule 6; r 6.01(1); r 6.03; r 6.15; r 6.16; r 6.24; r 6.39 |
| McMahon and McMahon (1976) FLC 90-038 Prowse and Prowse (1995) FLC 92-557 Rigoli Lawyers & Arman [2009] FamCA 42 |
| APPLICANT: | Mr Ramon |
| RESPONDENT: | Z Law Firm |
| FILE NUMBER: | PAC | 2186 | of | 2009 |
| DATE DELIVERED: | 20 March 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Johnston J |
| HEARING DATE: | 29 August 2011 |
REPRESENTATION:
| COUNSEL FOR THE APPLICANT: | Ms Steggall |
| SOLICITOR FOR THE APPLICANT: | PMF Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Maiden, SC |
| SOLICITOR FOR THE RESPONDENT: | Kevin O'Kane & Co |
Orders
That the costs assessment order by Registrar Tran dated 11 February 2011 be set aside.
That the husband have leave to file and serve a Notice Disputing Itemised Costs Account not later than 5 April 2012.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Ramon & Z Law Firm has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: PAC 2186 of 2009
| Mr Ramon |
Applicant
And
| Z Law Firm |
Respondent
REASONS FOR JUDGMENT
These proceedings involve a costs dispute between Mr Ramon and Z Law Firm. For convenience I shall refer to them as “the husband” and “the solicitor ”.
The issue for determination is whether the Court should set aside a costs assessment order and give leave to the husband to file and serve a Notice Disputing Itemised Costs Account in circumstances where he is out of time for doing so.
The solicitor acted for the husband in proceedings in this Court in relation to settlement of matrimonial property.
The husband signed a costs agreement on 24 July 2006. This contained provisions setting out the basis on which the husband would be charged for the provision of legal professional services. The solicitor gave the husband a costs notice as required by rules 6.03 and 6.16 of Schedule 6 of the Family Law Rules 2004 (“the Rules”).
The proceedings were heard by Coleman J over four days during September 2007 and March 2008. The solicitor instructed counsel for the hearing. Two expert witnesses were also involved. Judgment was handed down on 12 May 2008 and orders were made.
Shortly after receiving the judgment, the husband instructed the solicitor to represent him in relation to an appeal that the husband’s former wife had filed in the proceedings. The husband also instructed the solicitor to file a cross-appeal on his behalf, which the solicitor did. It is in relation to the costs of the preparation and presentation of the appeal, and associated costs, that the husband and the solicitor are in dispute.
The appeal came before the Full Court on 7 April 2009. It was resolved by the parties coming to an accommodation which resulted in orders being made to the effect that the Full Court allowed the husband’s former wife’s appeal and also allowed the husband’s cross-appeal in part. So the result was different from that ordered by the trial judge.
It is clear that such of the legal costs of the appeal as have been paid have been paid from funding provided by a finance company, X Limited.
It is common ground that during the course of preparation of the appeal and after its conclusion, the solicitor sent to the husband regular memoranda of fees together with statements of account. It would appear that X Limited has paid the solicitor the major part of the costs for legal services provided up to the time of judgment including counsel’s fees, experts’ fees as well as disbursements. I understand that the husband has since paid X Limited.
In August 2010 the solicitor served on the husband an itemised costs account in the amount of $61,405.24. The solicitor asserts that this was for costs outstanding for work done in relation to the appeal.
Under Rule 6.24 of Schedule 6 of the Rules a person served with an itemised costs account may dispute the account by serving on the solicitor a Notice Disputing Itemised Costs Account within 28 days after service. It is common ground that the husband failed to serve such a Notice on the solicitor.
In these circumstances Registrar Tran issued a costs assessment order on 11 February 2011 ordering that the amount payable by the husband to the solicitor was $61,405.24.
The husband now seeks an order to the effect that the costs assessment order be set aside and that he have the Court’s leave to file and serve a Notice Disputing Itemised Costs Account out of time.
The Husband’s Case
There were several strands to the submissions on behalf of the husband. The first was that the husband did not file a Notice Disputing Itemised Costs Account because he was not advised and was not aware of his obligations to respond within 28 days of receiving the relevant itemised costs account.
Another part of the submission was that the husband only ever entered one costs agreement with the solicitor, that being the costs agreement dated 24 July 2006 in relation to what the husband described as being the first instance proceedings. It was submitted that the husband never entered into a separate costs agreement in respect of the appeal proceedings, the inference being that in the absence of such agreement the solicitor was in error by charging in accordance with the 24 July 2006 costs agreement.
There was also a submission to the effect that the solicitor has been negligent and/or incompetent and that at least some of that alleged negligence would be able to be addressed during the costs assessment process.
The fourth aspect of the submission was as follows. The company X Limited made a loan to the husband under a litigation funding arrangement to a total of $299,266.40. It was clear that of this amount $68,658 was for interest paid to the company. Since June 2009 the husband had been endeavouring to ascertain from X Limited what was described as a breakup of the various payments made by the company to the solicitor on his behalf. The husband was also seeking from the company, authorities which had been signed by him for the various payments made by the company to his solicitor, counsel and experts.
The husband was endeavouring to undertake an exercise which would involve reconciling the invoices for work done by the solicitor with the money which had been paid on his behalf to the solicitor by X Limited. It was submitted that doing the best that he could, the husband formed the view that there was a discrepancy of $49,645 between the monies paid out by X Limited and the work which the husband understood the solicitor had done. The husband drew his concerns about this to the attention of the solicitor but he has never received a satisfactory response from the solicitor. It was true that the solicitor provided the husband with details of the money paid by X Limited. But the solicitor has not provided copies of additional invoices requested by the husband, the inference being that the husband has been unable to achieve the reconciliation of accounts.
In all these circumstances the husband has a strong suspicion that either the solicitor has been overpaid by X Limited or that approximately $49,000 of the $61,000, the subject of the costs assessment order, has already been paid to the solicitor.
It was submitted that the Court, in considering the exercise of its discretion, should err on the side of caution and grant the indulgence to the husband involved in giving him leave to file out of time. It was submitted that this was the approach taken by Cronin J in Rigoli Lawyers & Arman [2009] FamCA 42.
It was also submitted that included in the $61,000 account the subject of the costs assessment order was an item for fees owing to counsel which has already been paid. In support of this, learned counsel for the husband referred to Annexures B and C to the husband’s affidavit sworn on 10 May 2011 being an account from counsel and a copy of a bank statement showing certain funds paid by the husband. I am unable to form a conclusion about this matter. But what the husband appears to be asserting about this matter could not be confidently discounted on the basis of any of the material which was before the Court at the hearing.
The Solicitor’s Case
It was submitted on behalf of the solicitor that he has done what the law requires of him in order to recover his costs from the husband. It was submitted that in the event that the Court should grant the husband the indulgence he seeks then the solicitor would suffer the prejudice of not having the benefit of the costs assessment order.
It was submitted that it is fundamental to an application for an extension of time for an applicant to give an adequate explanation for delay. It was submitted that the husband has not done this and that he indicated in his affidavit sworn on 24 November 2011 that he did not file a Notice of Disputed Costs Account because he was uncertain what to do in relation to the account. It was submitted that the relevant itemised costs account served on the husband had the following relevant passage appearing on the front page of the document under Part A.
(2)If you do not agree with all or part of this itemised costs account, you must, within 28 days of the account being served on you serve the person (the solicitor) with a Notice Disputing Itemised Costs Account (Form 15).
It is further submitted that every itemised costs account sent to the husband during the course of the solicitor’s representation of him, approximately fifteen in total, bore similar information on the front of the account.
Learned senior counsel for the solicitor referred to the husband’s assertion that he only had a costs agreement with the solicitor in respect of the proceedings at trial and inferred that because there was no costs agreement specifically in respect of the appeal proceedings, then the solicitor would not be able to charge the client any costs at all.
It was submitted that the husband’s application was misconceived. It was submitted that the husband is not really complaining about the costs of the bill for $61,000 but rather that he has to pay any amount at all to the solicitor because he has the view that the solicitor was negligent or incompetent. And this complaint is set out not only in the original affidavit but also in the husband’s later affidavit. It was further submitted that what the husband is endeavouring to do by trying to bring costs assessment proceedings is to use such proceedings as a fishing exercise to assist him in professional negligence proceedings which he said he proposes to bring against the solicitor in the New South Wales Supreme Court. It was submitted that if in fact that is the husband’s intention, then the present proceedings would be pointless because if the husband was to succeed in the professional negligence proceedings, he would recover damages which would probably have the effect of him not having to pay the solicitor for the family law proceedings.
In relation to the husband’s assertion that $49,645 has not been accounted for by the solicitor, it was submitted that each of the payments from X Limited to the solicitor or others involved in the case had been authorised in writing by the husband. It was further submitted that in any event the solicitor regularly sent accounts throughout the entirety of the proceedings to the husband, the inference being that the solicitor has nothing to account for.
In relation to the assertion on behalf of the husband that one of the items comprised in the account the subject of the costs assessment order, being fees owed to counsel which it was asserted have already been paid, it was submitted that on the material referred to on behalf of the husband about this matter such a conclusion could not be drawn.
Discussion
I agree with the submission by learned senior counsel for the solicitor that it would not be a proper use of costs assessment proceedings to endeavour to somehow ventilate concerns about alleged negligence or incompetence on the part of the solicitor concerned. Those are matters for consideration in a different place as senior counsel stated. The purpose of the costs assessment process is to endeavour to resolve disputes about costs and to ensure that, in a case such as this, where there is a costs agreement between the solicitor and the client, that the costs have been charged in accordance with such agreement.
Another matter which appears to have injected some confusion, is the suggestion inherent in the husband’s assertions in his affidavit, that because the solicitor was undertaking work in relation to the appeal, he would not be permitted to charge on the basis of a costs agreement entered into with the client with respect to the trial proceedings, as distinct from the appeal proceedings.
I must say I do not understand any basis for such an assertion. In this regard I note that Rule 6.15 of Schedule 6 of the Rules provides as follows:
6.15(1)A lawyer may make a written agreement (the costs agreement) with a client about the costs to be charged by the lawyer for work done for a case for the client.
I note that the Dictionary at the end of the Rules defines “case” to mean as follows:
(a)[case] means a proceeding under the Act …
In my view, there can be no question that the substantive property proceedings for which the solicitor was engaged to represent the husband was such a proceeding. In my view it continued until it was completed by the orders of the Full Court on 7 April 2009. The solicitor did work “for a case for the client” from inception until after 7 April 2009.
I can see no basis, therefore, for any submission to the effect that the solicitor was not entitled to charge for work done in respect of the appeal because he did not have a separate costs agreement in relation to the appeal. In fact, as learned senior counsel for the solicitor observed, one would have thought that it would have been to the husband’s advantage that the solicitor did not require a subsequent costs agreement because the latter presumably would have involved a higher level of fees given matters of inflation, than the level of fees contained in the 24 July 2006 costs agreement.
I shall deal with the remaining submissions below.
The Applicable Law
Because these proceeding commenced before 1 July 2008 the relevant provisions of the Rules which apply are contained within Schedule 6. This is provided by Rule 6.01(1) of Schedule 6 thereof which is as follows:
6.01(1)This Schedule only applies for work done for a case, or in complying with pre-action procedures associated with a case, that commenced before 1 July 2008.
As indicated above, Rule 6.24 of Schedule 6 makes provision for a person to dispute an itemised costs account. It is as follows:
6.24A person served with an itemised costs account may dispute it by serving on the person entitled to the costs a Notice Disputing Itemised Costs Account within 28 days after the account was served.
Rule 6.39 of Schedule 6 makes provision for setting aside a costs assessment order. Rule 6.39(2) provides as follows:
6.39(2) The party (who is liable to pay costs and receives a costs assessment order) may, within 14 days after receiving the costs assessment order, apply to have it set aside.
Rule 1.14 of the Rules makes provision for shortening or extending time. Subrules 1.14(1) and 1.14(2) provide as follows:
1.14(1)A party may apply to the court to shorten or extend a time that is fixed under these Rules or by a procedural order.
1.14(2)A party may make an application under subrule (1) for an order extending a time to be made even though the time fixed by the rule or order has passed.
Discretion
The discretion which the Court has in relation to extending a time set out in the Rules is a very wide one.
As early as 1976, the first year of this Court’s operation, the Full Court of this Court considered its discretion to extend time for filing a Notice of Appeal in McMahon and McMahon (1976) FLC 90-038. At page 75,144 Evatt CJ said as follows:
The general principles governing applications for leave to extend time are established by a number of cases. In summary, the applicant must show that there are adequate reasons which explain the delay; that there is a substantial issue to be raised on appeal; and that no hardship or injustice is caused to the Respondent which cannot be compensated by orders as to costs or otherwise.
In Prowse and Prowse (1995) FLC 92-557 the Full Court said as follows at page 81,572:
… in Tormsen and Tormsen (1993) FLC 92-392 at 80,017 … the Full Court said:-
… The fundamental issue in an application for extension of periods of time prescribed by rules of court is whether this will enable the court to do justice between the parties: Hughes v. National Trustee Executors & Agency Co. of Australia Ltd [1978] VR 257 at 262 per McInerney J. cited with approval in Gallo v. Dawson (1990) 93 ALR 479 at 480 per McHugh J.
That statement is in conformity with the statement of general principle by McHugh, J. in Gallo v. Dawson (supra) that “the discretion [to extend the time prescribed by rules of Court] can only be exercised in favour of an applicant upon proof that strict compliance with the rules will work an injustice upon the applicant”, and that “[i]n order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time”.
So the range of matters relevant to the proper exercise of the discretion is indeed broad.
Explanation for Delay
The husband, in his affidavit sworn on 24 February 2011 said that he “did not file a notice of dispute of the itemized costs account filed by [Z Law Firm] because [he] was uncertain what to do in relation to that account.”
In his affidavit sworn on 10 May 2011 the husband said that he “did not file a Notice Disputing the Itemized Costs Account within the time allowed as [he] was not advised or aware that [he] could do so.”
What is puzzling about this assertion is that on the front of the Itemised Costs Account served on the husband appeared the same information which the solicitor said (as indicated above) he had included in every account he had sent to the husband. For convenience I set it out again as follows:
Part ATo the person from whom costs are claimed [Mr Ramon]
…
(2)If you do not agree with all or part of this itemised costs account, you must, within 28 days of the account being served on you serve [Z Law Firm]] with a Notice Disputing Itemised Costs Account (Form 15).
I must say that in these circumstances it is difficult to accept that the husband had not read this information and that he was not aware that he could file such a Notice. In my view, there is more credulity in his assertion that he was uncertain what to do in relation to the account.
The Itemised Costs Account was received by the husband in August 2010. The husband’s application was filed on 24 February 2011. So the delay was approximately six months.
In my view, what the husband had offered by way of explanation could not be regarded as an adequate explanation for the delay.
Hardship to the Husband
As indicated above, the husband has had it in mind that there may be a discrepancy between what was paid on his behalf by X Limited and what was required to be paid pursuant to the invoices for legal services provided by the solicitor. As indicated above, he pointed to one item namely, an account from his counsel, which he suspects he has already been paid. As indicated above, the solicitor was unable to offer any evidence at the hearing to clarify this matter one way or the other.
If the husband is correct in his assertion that there is a discrepancy as suggested, and that it is in a significant amount, then such would constitute a hardship to him in my view because he would then not owe the solicitor anything like $61,000.
Prejudice to the Solicitor
Clearly the solicitor is entitled to his proper costs for legal work undertaken for the husband in accordance with the provisions of their costs agreement. And, subject to the matter I shall refer to below, the solicitor has used the proper mechanism under the Rules as the precursor to being able to take action to recover his costs.
If the husband is permitted the indulgence he seeks, then the parties will embark on the costs assessment process. Amongst the consequences for the solicitor would be delay of presumably some months involved in the assessment process.
If the husband turned out to be unsuccessful, orders could be made with respect to interest on the outstanding amount and in relation to costs. A possibility might be that the solicitor might not recover the entirety of his costs.
The Prospect of Success
It is quite unclear to me at this time whether the husband would be likely to have success in the assessment process. This is because there was insufficient evidence put before the Court by each of the parties to assist in clarifying their dispute.
Other Matters Relevant to the Discretion
After the Full Court orders brought the substantive litigation to completion in April 2009 the husband became involved in the process of implementation of the orders.
In this context, as indicated above, he endeavoured to ascertain from X Limited details of the money which they had paid on his behalf to the solicitor. Within a month or so of his initial request he was informed that a total of $299,266 had been paid to the solicitor. But many months went by before complete details were provided.
At the same time the husband was endeavouring to collate details of the invoices he had received from the solicitor. He wanted to undertake a reconciliation of the invoices with the details of money paid to the solicitor on his behalf.
In February 2010 the husband informed the solicitor that he was missing some of the invoices from the solicitor for work done and he asked the solicitor to let him have copies. The husband was also asking for clarification about various payments made by him to the solicitor.
The husband initially suggested to the solicitor that there was a discrepancy of approximately $67,000 between what had been paid out by X Limited and amounts in the solicitor’s invoices.
In early May 2006 the husband again informed the solicitor that there appeared to be a $67,000 disbursement by X Limited which the solicitor had not accounted for and he requested an explanation. A couple of weeks later the husband again wrote to the solicitor saying that he had reviewed signed authorities which the solicitor had sent to him and, having compared these with the funds paid by X Limited, he had the view that the discrepancy was $49,645.84, rather than $67,000 which had not been accounted for by the solicitor.
A few days later the husband again wrote to the solicitor. He noted that he had not received answers to his questions and sought a copy of all invoices that were paid from the X Limited money.
This letter probably crossed with a letter from the solicitor setting out details of the money received by him from X Limited and the disbursements paid directly by X Limited. The solicitor indicated that he had provided information about three cheques issued by the predecessor of X Limited, Company V to counsel and the expert witnesses for a total of $63,180.50.
The husband never received the copy of the invoices sought by him from the solicitor.
There was a strong submission on behalf of the solicitor to the effect that there could be no basis for any concern by the husband about any such discrepancy. This was submitted to be firstly because the solicitor had been meticulous in sending out itemised accounts with every invoice and the husband must have had these accounts. And secondly, because every payment by X Limited had been authorised by the husband so the husband could not be in any uncertainty that all matters were approved by him and properly attended to.
I must say I have a different view about this. In my view, it was quite reasonable for the husband to be concerned to be in a position to undertake a reconciliation between the solicitor’s invoices and the money paid to the solicitor at various times by X Limited on his behalf. There can be no question that he was endeavouring to obtain assistance from the solicitor and he did obtain details from the solicitor about money paid to the solicitor by X Limited.
But his requirement involved more than this. He wanted the solicitor to provide him at least with copies of invoices which the husband said he no longer had. The solicitor did not comply with this request.
In my view, this was unfortunate because it has left open the real possibility that the husband was unable to achieve the reconciliation of accounts which should have enabled him to be clear about whether there was a discrepancy of approximately $49,000 or not.
Conclusion
It is the case that the husband has not provided an adequate explanation for his delay in taking appropriate action under the Rules. But this is one of several relevant matters.
So far as comparative hardship or prejudice is concerned, in my view the pendulum swings in the husband’s favour.
But in my view the matter which tips matters in the husband’s favour is the last matter referred to. At the time when the solicitor served the Itemised Costs Account which then triggered the time limit, the husband was still endeavouring to ascertain what the position was in relation to whether there was a discrepancy as referred to above. In circumstances where, in my view, he should have been provided with some more assistance in clarifying the accurate position about his accounts, and he was not, the Court’s discretion should be exercised to offer the husband the indulgence he seeks.
As indicated above, learned counsel for the husband submitted that in Rigoli Laywers & Arman [2009] Fam CA 42 Cronin J erred on the side of caution in granting the indulgence and in the circumstances of the present case the Court should follow suit.
With respect, I agree. In all the circumstances, in my view, it is appropriate that the Court’s discretion is exercised in favour of setting aside the costs assessment order and granting the husband the leave he seeks.
To the extent that this might ultimately visit a serious prejudice on the solicitor, one would anticipate that such could be addressed by orders including an order for costs.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Johnston delivered on 20 March 2012.
Associate:
Date: 20 March 2012
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