Re Finnie; Petrovska v Morrison (No 3)
[2021] VSC 715
•29 October 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST
S ECI 2018 00174
| VESNA PETROVSKA | Plaintiff |
| v | |
| JOHN ALEXANDER MORRISON (in his capacity as executor and trustee of the estate of JAMES FINLAY FINNIE, deceased) | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 29 October 2021 |
CASE MAY BE CITED AS: | Re Finnie; Petrovska v Morrison (No 3) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 715 |
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COSTS — Where domestic partner of deceased sought provision from estate — Where sole issue was quantum of provision — Whether costs of practitioners reasonable and proportionate and fair and reasonable — Whether practitioners complied with disclosure obligations — Where one firm failed to produce a costs agreement and costs disclosure statement — No prima facie evidence that costs are fair and reasonable — Legal Profession Uniform Law Application Act 2014 (Vic) sch 1 ss 172(1)–(3), 174(1)–(3), (6), 178(1), 180(2)–(4), 207; Civil Procedure Act 2010 (Vic) s 24 (a)–(b).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms JA Findlay | Whyte, Just & Moore Solicitors |
| For the Defendant | Mr PA Cassidy | Coulter Roache Lawyers |
HER HONOUR:
Introduction
James Finnie (‘the deceased’) died on 12 September 2017, leaving a will dated 25 June 1992 (‘the will’). The deceased was survived by his partner of nearly 20 years (‘the plaintiff’), three of his four adult children from an earlier marriage, and three grandchildren who were children of the deceased’s son who predeceased him.
The will was made prior to the commencement of the relationship between the deceased and the plaintiff and made no provision for her. Pursuant to the will, the deceased’s four children were to inherit his estate in equal shares, with a gift over if any of the children predeceased him.
After probate of the will was granted to the executor of the estate (‘the defendant’), the plaintiff brought a claim for provision from the estate, pursuant to Part IV of the Administration and Probate Act 1958 (Vic).
The defendant accepted the deceased owed a moral duty to provide for the plaintiff and that the deceased had failed to make adequate provision for her proper maintenance and support. The sole issue at trial was the quantum of provision which should be made to the plaintiff.
The trial of the proceeding was held on 22 September 2020. In reasons published on 30 March 2021, the Court determined that the plaintiff should receive 40 per cent of the estate available for distribution.[1] At trial the value of the estate available for distribution was estimated at approximately $807,024.[2] The Court was precluded, however, from making final orders due to the existence of unknown variables affecting the actual value of the estate. Those variables were the total costs of the parties estimated at $198,000, and an allowance for capital gains tax estimated at $77,000.[3]
[1]Re Finnie; Petrovska v Morrison [2021] VSC 153 (‘Reasons’).
[2]Ibid [126]–[127].
[3]Ibid [130]. The estimated value of $807,024 takes into account the estimated costs of the parties of $198,000 as provided at trial, but not the allowance for capital gains tax of $77,000: Reasons [87], [127].
The plaintiff had disputed that the proper liabilities of the estate included an allowance of $77,000 for payment of capital gains tax on the sale of two properties forming part of the estate — the Goldsworthy Road property and the Wolsley Court property.[4] The plaintiff did not appear to contend that capital gains tax generally could not be a proper liability of the estate, rather the plaintiff argued that in circumstances where the defendant had not sought advice on the amount of capital gains tax that would be payable and had not filed tax returns for the estate, the Court could not rely on the defendant’s estimated allowance as accurate.[5]
[4]Some familiarity with the Reasons is assumed.
[5]Reasons [76]–[77].
The Court agreed and indicated that the defendant should file tax returns on behalf of the estate and seek advice on capital gains tax payable.[6] The parties were ordered to provide further details of the estimated costs of the proceeding and an updated position in regards to the payment of any capital gains tax.[7]
[6]Ibid [79].
[7]Ibid [130]; order of McMillan J dated 30 March 2021.
Capital gains tax
The defendant’s solicitors, Coulter Roache Lawyers (‘CRL’), filed an affidavit exhibiting the estate’s income tax return for the year ending 30 June 2019. In that year, the estate paid tax of $29,090.15 in respect of the capital gain made on the sale of the Goldsworthy Road property.
The affidavit also exhibited a letter sent to CRL by the estate’s accountants, Patrick Rowan & Associates, dated 9 April 2021. In that letter, Ms Pemberton, a partner of Patrick Rowan & Associates, estimated the tax payable if the two remaining estate properties — the Darriwill Street property and the Wolsley Court property — were sold. Taking into account relevant exemptions, the estimated net capital gains totalled $73,000, with tax payable estimated at $20,000. A fee estimate of $850 plus GST for the calculation of the capital gains tax, and preparation and lodgement of the tax return, was also provided.
Accordingly, the estimated total tax payable by the estate with regards to capital gains on estate properties is $49,090.15. On the basis of the evidence provided by the defendant this figure, in addition to the accountant’s fee, is accepted as a proper liability of the estate to be taken into account in calculating the provision which is to be made to the plaintiff.
Concerns as to costs
Further details of the estimated costs of the proceeding were initially provided by way of correspondence to the Court. The plaintiff’s claimed costs totalled $109,251, a small increase from the estimate of $103,835 provided at trial. The defendant’s claimed costs totalled $121,217, a significant and unexplained increase from the estimate of $94,000 provided at trial.
By email dated 7 May 2021 to CRL and the plaintiff’s solicitors, Whyte, Just & Moore Solicitors (‘WJM’), the Court raised concerns about the costs claimed in circumstances where there was only a one day trial and the defendant had accepted the deceased owed a moral duty to the plaintiff. The Court noted particular concern with the increase in the defendant’s estimated costs, and the amount of total costs relative to the value of the estate.
The Court directed the practitioners to file affidavits concerning their claimed costs (including itemised invoices and disclosure statements), and submissions as to whether:
(a) the costs were reasonable and proportionate; and
(b) disclosure was made in accordance with the Legal Profession Uniform Law (‘the LPUL’).[8]
[8]The LPUL is set out at sch 1 of the Legal Profession Uniform Law Application Act 2014 and pursuant to s 4 of that Act, applies as if it were an Act.
CRL and WJM provided their affidavits and written submissions on 11 June 2021 and 16 June 2021, respectively.
WJM’s submissions
Disclosure
The plaintiff’s costs and disbursements of the proceeding totalling $109,257 comprise WJM professional fees of $55,634, counsel fees of $46,665, and court fees and other disbursements of $6,958.
Disclosure of estimated legal costs was made to the plaintiff when the plaintiff signed a disclosure statement and costs agreement from WJM on 24 May 2018. The disclosure statement estimated the plaintiff’s legal costs — assuming the matter could be resolved before a final hearing — at $35,000. To prepare the matter for hearing and including the first day of a Court hearing, an additional $80,000 in professional fees was estimated. The plaintiff’s legal costs are within this initial estimate of $115,000.
Ongoing disclosure of the legal costs incurred during the conduct of the proceeding was also made to the plaintiff by Mr Aaron Jolly of WJM. The plaintiff was provided with copies of, and gave instructions to file, a number of documents which included estimates of her legal fees. These included joint trial documents which estimated the plaintiff’s costs at $110,000 and the plaintiff’s closing submissions which stated the plaintiff’s costs to the conclusion of the trial were in the amount of $103,835.
Reasonable and proportionate costs
WJM submits that the costs incurred by the plaintiff were reasonable and not disproportionate. While the costs incurred were greater than might be usual for a one day hearing of a family provision claim, features peculiar to the conduct of the proceeding — although not attributable to the plaintiff — contributed significantly to her costs.
First, despite numerous directions hearings held between August 2018 and July 2019, it was only on 16 July 2019 that the trial was initially set down to commence on 12 August 2019. WJM’s position is that the primary reason for the Court’s reticence to set down the matter for trial was the lengthy estimate of the duration of the trial, which WJM says was attributable to the defendant’s insistence on leading viva voce evidence from seven lay witnesses, some of whom resided in Scotland. In attempting to reach consensus on a joint trial document, including the estimated trial duration, the plaintiff’s position was that affidavits filed in the proceeding should stand as evidence in chief. This was opposed by the defendant but, ultimately, was the course adopted at trial.
Secondly, despite an order having been made requiring the defendant to file and serve his evidence by 7 November 2018, the defendant filed further ad hoc evidence in February, April and May 2019.
Thirdly, although a settlement was negotiated between the parties, it was not ultimately approved by the Court. A mediation took place in December 2018, which was unsuccessful. WJM states that the plaintiff did not have the benefit of the full suite of the defendant’s evidence at the mediation, due to the defendant’s continued ad hoc filing of evidence up to and including May 2019. Further settlement discussions took place between the respective parties’ counsel between June and August 2019, with the parties signing formal documentation of those terms on 15 August 2019. On 26 September 2019, the defendant applied for approval of the terms of settlement, however, on 29 January 2020, the Court refused that approval.[9] From the reasons in that judgment, it appears that the sui juris beneficiaries did not consent to the compromise and the minor beneficiaries would have been left with a small percentage of the estate. Further, independent counsel’s advice was that the compromise was not in the best interests of the minor beneficiaries.
[9]Re Finnie; Petrovska v Morrison [2020] VSC 9 (Ierodiaconou AsJ).
A further complication identified by WJM in reaching settlement was the non‑cooperation of beneficiaries of the will, and the fact that some of the beneficiaries were not sui juris.
Lastly, following the failure to obtain the Court’s approval to the settlement, the trial was ultimately re-listed for 22 September 2020. WJM says that much of the preparatory work done for trial in mid-2019 was largely wasted given the trial was not in fact heard until over a year later. The accumulative delay, WJM submits, also contributed to increased costs; the longer a proceeding is on foot, the more attendances are necessary both in terms of following up the other party and updating the plaintiff.
The plaintiff conducted the trial in an efficient manner, electing not to cross-examine the beneficiaries.
WJM accepts the Court did not order provision in the amount sought by the plaintiff, but submits it was nevertheless reasonable for the plaintiff to proceed to trial to have the quantum of her provision determined by the Court after the settlement failed to gain the Court’s approval. While the plaintiff was awarded less than 50 per cent of the value of the estate, the provision ordered in the amount of 40 per cent of the value of the estate means she is to receive a greater part of the estate than any other person. Accordingly, her costs of making the claim on the estate, which claim was necessary in the circumstances, should be paid from the estate.
WJM notes that although it does not have a conditional costs agreement with the plaintiff, WJM has agreed not to require the plaintiff to make payment of its professional fees until the proceeding has been finalised. Save for one invoice which has already been paid by the plaintiff, plaintiff’s counsel has agreed to the same arrangement.
CRL’s submissions
Disclosure
Affidavits of Mr Daniel Black and Mr Stefan Manche were filed by CRL.
Mr Black was a solicitor employed by CRL until 1 May 2020, during which time he had carriage of the proceeding under the supervision of the principals at CRL. Mr Manche commenced employment with CRL on 18 May 2020 and took over carriage of this proceeding on 1 June 2020.
Following receipt of the Court’s email dated 7 May 2021, Mr Manche and his colleagues undertook a lengthy search for any formal costs engagement agreement entered into with the defendant, however, none has been located. On 26 May 2021, Mr Black was informed by Mr Manche and others from CRL that they were unable to locate a costs agreement on the file.
Mr Black deposes that his usual practice at CRL was to prepare a costs agreement and disclosure statement using the firm’s template documents. To the best of his recollection, the template disclosure documents disclosed the basis of charge as time-based charging, calculated in 6-minute units, based on disclosed hourly rates. Mr Black does not specifically recall sending a costs agreement in this matter, but believes he would have done so in accordance with his usual practice.
Mr Black believes CRL would have provided an estimate of either $25,000 or $30,000 in its initial costs disclosure to the defendant. That belief is based on Mr Black’s recollection that he formed the view that, if proceedings were issued, the costs of each party up to and including mediation would likely be in this range. Mr Black deposes that he recalled discussing these figures with the defendant. Mr Black cannot explain why a costs disclosure statement has not been located; he cannot be certain whether he prepared a costs agreement and misfiled it, or whether it was inadvertently not prepared and sent to the defendant.
Mr Manche deposes that the absence of the formal costs disclosure and engagement agreement was overlooked by him until receipt of the Court’s email. When Mr Manche took over carriage of the proceeding, it had been on foot for over two and a half years, and, in light of the LPUL and CRL’s general practice in providing costs disclosures, he assumed a formal costs disclosure had been provided to the defendant. In attempting to familiarise himself with the proceeding in a short period of time, he did not prioritise searching for an engagement agreement but rather focused on attempts to settle prior to trial, and then at the trial itself. Further, from the time he commenced employment with CRL until the conclusion of the trial, Mr Manche was working from his home as a result of COVID-19 restrictions, and did not have the benefit of access to the physical file stored at CRL’s office.
Although accepting these circumstances do not negate the professional requirement to provide formal costs disclosure to a client, CRL identify a number of disclosures made by Mr Black to the defendant which, it submits, amounts to ‘practical disclosure’ having been made throughout the course of the proceeding.
The earliest documentary evidence of costs disclosure said to be located on file is an email dated 3 December 2018 from Mr Black to the defendant, attaching a draft affidavit containing the financial position of the estate at that date. Mr Black deposes that the draft affidavit set out CRL’s costs to finalise the administration of the estate and the mediator’s fee, together with disbursements. Litigation costs were recorded as ‘TBA’. The draft affidavit is not included as an exhibit to Mr Black’s affidavit.
Further disclosure of the estimated $25,000 in legal costs was said to have been made to the defendant on 13 December 2018 at the mediation. Mr Black exhibits a redacted file note, which records the words: ‘Def - $25k’, ‘Def Pt IV - $25,500’, ‘25,500.00 Def Pt IV costs including court approval’. Mr Black deposes that he believes the defendant understood and consented to those costs.
A later file note prepared on the same day — when it became apparent settlement would not be reached — records the words: ‘If it doesn’t settle further costs of $90,000 total to trial’. Mr Black deposes this records a further discussion he had with the defendant that the total future legal costs of both parties if the matter proceeded to trial would be $90,000.
On 24 July 2019, further written costs disclosure was made to the defendant when Mr Black blind-copied him into an email attaching a letter to WJM. That letter records estate administration costs and disbursements paid to 23 May 2019 as $9,985.50, and estate litigation costs and disbursements paid up to and including mediation as $24,710. CRL’s anticipated fees were estimated at $34,600, including litigation costs and disbursements, attendance at the settlement approval hearing, unbilled WIP and costs to finalise administration. Counsel’s fees were estimated at $2,000.
On 29 July 2019, Mr Black provided the defendant by email a letter from WJM containing a settlement offer. Mr Black deposes that, in his email, he set out the distributions to the residual beneficiaries of the will, taking into account all incurred and anticipated costs at that point in time. The exhibited email is redacted where figures are recorded.
In addition to these written disclosures, Mr Black deposes that he can recall discussing costs with the defendant on a number of occasions, including shortly after the email of 29 July 2019. Mr Black believes that at all times throughout the retainer, the defendant was aware of the anticipated costs and the proposed courses of action, and consented to them. The defendant did not, during Mr Black’s involvement, express any dissatisfaction with either the costs or quality of legal services provided.
Mr Manche deposes to the costs disclosure made by the defendant’s counsel throughout the course of the proceeding.
The defendant also filed an affidavit relating to the amount and disclosure of legal costs and disbursements in this proceeding. He deposes that he does not recall receiving a formal engagement agreement from CRL and cannot locate one in his records. He confirms, however, that he was generally aware of the extent of costs incurred by and anticipated for the estate. This awareness was the result of: tax invoices regularly supplied by CRL; verbal conversations with Mr Black and later Mr Manche, including conversations which explicitly detailed current costs and future legal fees; participation in discussions about costs at mediation; reviewing statements detailing the financial position of the estate; and disclosures of counsel’s costs, forwarded to the defendant by CRL.
Reasonable and proportionate costs
CRL also identifies peculiarities with the administration of this estate and with this Part IV proceeding which have resulted in unusual costs.
In respect of the administration of the estate, CRL notes that some time was spent trying to search for a more recent will made by the deceased, identifying assets of the deceased, and trying to contact beneficiaries of the will.
The defendant executor was an old friend of the deceased who had had very little interaction with the deceased’s family. Making contact with, and obtaining the cooperation of the beneficiaries was therefore difficult, particularly the beneficiaries who resided in Scotland with complicated personal and financial circumstances. There were, in addition, minor beneficiaries, who had to be contacted through representatives or guardians. The COVID-19 pandemic further complicated matters both locally and for beneficiaries living in Scotland.
Affidavits and statements had to be obtained from the overseas beneficiaries, as well as from guardians of the minor beneficiaries. It was also necessary to keep the beneficiaries up to date with the proceeding, and make arrangements for the Scottish beneficiaries and witnesses to testify remotely at trial from Scotland. CRL says it was not until 8 September 2020 that the plaintiff informed the defendant and the Court that the plaintiff no longer intended to cross examine the witnesses. Prior to 8 September 2020, Mr Manche had been making arrangements with the Scottish courts and third party videoconference providers for the beneficiaries and witnesses to attend a court in Edinburgh to give evidence, as court facilities in Glasgow were closed due to the COVID-19 pandemic. Accepting these arrangements were not ultimately needed. CRL submits it was reasonable and necessary to make those arrangements at the time.
CRL submits the defendant made every effort to resolve the proceeding without the need for a trial. Significant time and resources — beyond that which could reasonably be anticipated by either party — were expended prior to trial in terms of negotiating and reaching a settlement agreement, and presenting that agreement to the Court as part of combined applications pursuant to ords 15 and 54 of the Supreme Court (General Civil Procedure) Rules 2015. However, that settlement agreement was not approved by the Court.
Subsequent settlement negotiations were also unsuccessful, through no fault of the defendant. The complexities of the matter, including the competing claims of other adult and minor beneficiaries, required a trial to determine the plaintiff’s proper entitlement.
CRL contends that, having due regard to the unusual and numerous complexities present in this matter, the costs incurred by the estate are fair and reasonable. Mr Black deposes that his own time records kept at CRL were in fact a conservative record of the time he actually incurred on the file.
In terms of the discrepancy between the estimate of the defendant’s legal costs and disbursements as provided at trial[10] and the actual costs to the end of trial,[11] Mr Manche deposes that there may have been an unintended error in calculating the estimate provided at trial, due to his relative inexperience with the financial reporting system used by CRL, and the circumstances of Mr Manche’s access to the file while working remotely.
[10]$94,000.
[11]$121,217.
Applicable principles
In Re Jabe; Kennedy v Schwarcz,[12] the Court considered the question of whether practitioners’ costs were reasonable and proportionate within the meaning of the Civil Procedure Act 2010 (‘the CPA’), and fair and reasonable within the meaning of the LPUL:
[12][2021] VSC 106 (‘Re Jabe’).
The Court has inherent and general jurisdiction to ensure that legal practitioners as officers of the Court are remunerated properly.[13] This includes jurisdiction to ensure legal practitioners are paid no more than what is fair and reasonable.[14]
[13]Pryles & Defteros (a firm) v Green [1999] 20 WAR 541, [22]–[23] (Parker J) (‘Pryles & Defteros’), citing Harrison v Tew [1989] 1 QB 307, 320 (Dillon LJ); Electrical Trades Union v Tarlo [1964] 1 Ch 720, 723–4 (Wilberforce J); Sutton v Sears [1960] 2 QB 97, 102 (obiter dictum of McNair J).
[14]Ibid.
The inherent jurisdiction of the Court precludes overcharging even in situations where the excessive charges were agreed as a matter of private contract.[15] According to Fletcher Moulton LJ in Clare v Joseph[16] the Courts have viewed agreements between individuals and their legal advisers as to the latter’s remuneration with a ‘great jealousy’ due to the risk of circumstances in which solicitors may improperly attempt to benefit themselves at the expense of their clients.
[15]Pryles & Defteros (n 13) [24] (Parker J).
[16][1907] 2 KB 369, 376 (Fletcher Moulton LJ).
The statutory scheme set out in the LPUL should be seen as complementary to the inherent jurisdiction of the Court.[17] Section 172(1) of the LPUL provides that a law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that are in particular:
[17]Pryles & Defteros (n 13) [24] (Parker J).
(a) proportionately and reasonably incurred; and
(b) proportionate and reasonable in amount.
Subsection (2) sets out a number of matters that must be considered in determining whether sub-s (1) has been satisfied. These include factors such as the level of complexity, difficulty, experience, novelty, public interest, quality, labour, responsibility, seniority, skill, specialisation and urgency, as well as the number of documents, place, retainer and instructions, time and time spent.
Subsection (3) provides that ‘[i]n considering whether legal costs are fair and reasonable, regard must also be had to whether the legal costs conform to any applicable requirements of this Part, the Uniform Rules and any fixed costs legislative provisions’.
Section 24 of the CPA similarly provides that a person to whom the overarching obligations apply must use reasonable endeavours to ensure that legal costs incurred in connection with a proceeding are reasonable and proportionate to:
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
By virtue of s 207 of the LPUL a contravention of the requirement not to charge more than fair and reasonable legal costs may constitute unsatisfactory professional conduct or professional misconduct on behalf of the legal practitioners concerned.
Division 3 of pt 4.3 of the LPUL contains the provisions on costs disclosure. Section 174(1) provides:
A law practice—
(a)must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and
(b)must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client—
together with the information referred to in subsection (2).
Section 174(2)(a) provides that the disclosure must include information about the client’s rights:
(i) to negotiate a costs agreement with the law practice; and
(ii) to negotiate the billing method…; and
(iii) to receive an itemised bill from the law practice…; and
(iv)to seek the assistance of the designated authority in the event of a dispute about legal costs…
An additional obligation is imposed by s 174(3), which provides that the law practice ‘must take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs’.
Section 174(6) provides that disclosure must be made in writing.
In addition, s 180(2), (3) and (4) provide that costs agreements:
(a) must be written or evidenced in writing;
(b)may consist of a written offer that is accepted in writing or (except in the case of conditional costs agreements) by other conduct; and
(c)cannot provide that the costs to which they relate are not subject to a costs assessment or review.
From the perspective of law practices, compliance with the disclosure obligations is critical. Section 178(1) of the LPUL provides that if a law practice contravenes the disclosure obligations:
(a) the costs agreement concerned (if any) is void;
(b)the client is not required to pay the legal costs until they have been assessed;
(c)the law practice cannot commence or maintain recovery proceedings; and
(d)the contravention can constitute unsatisfactory professional conduct or professional misconduct.[18]
[18]Re Jabe (n 12) [44]–[56] (McMillan J).
Consideration of WJM’s costs
Disclosure
WJM’s disclosure statement and costs agreement appear to comply with the requirements in each of Division 3 and Division 4 of the LPUL.
Reasonable and proportionate costs
In considering whether legal costs are fair and reasonable in accordance with s 172(1) of the LPUL, regard must be had to a number of factors. Pursuant to s 172(2), this includes the level of complexity of the case, the novelty or difficulty of the issues involved, the labour and responsibility involved, and the circumstances in acting on the matter. Proportionality likewise requires examination of the complexity and importance of the issues, the quantum in dispute, and the importance of the issues to the individual involved in the proceeding.[19]
[19]Civil Procedure Act 2010 (Vic) s 24. See also, eg, Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194, [45] (Beach J).
WJM’s costs agreement is prima facie evidence that the legal costs disclosed in the agreement are fair and reasonable as the provisions of Division 3 relating to costs disclosure have been complied with and the costs agreement does not contravene the provisions of Division 4.[20]
[20]LPUL s 172(4).
The Court maintains a level of concern about the quantum of costs claimed by WJM, however, the fact that legal costs are high as a percentage of the estate is not a proper basis to conclude that the costs are disproportionate.[21] On balance, save for one matter addressed below, consideration of the particular circumstances of this case largely supports WJM’s submission that the costs incurred were reasonable and proportionate.
[21]See, eg, Williams v AusNet Electricity Services Pty Ltd [2017] VSC 474, [111] (Emerton J) (‘Williams v AusNet’).
Although it was admitted by the defendant that the deceased owed a moral duty to the plaintiff and had failed to make adequate provision for her, this Part IV proceeding was in other respects complex. The beneficiaries included minors and persons living overseas. Their specific personal circumstances and competing claims to the estate — which were integral to the question of what provision would likely be made for the plaintiff — were far from straightforward and required serious consideration in light of the size of the estate. Evidence of the beneficiaries’ personal and financial position was provided to the plaintiff over a protracted period and on an ad hoc basis.
The importance of the issues to the plaintiff is clear. This was not a case where the plaintiff challenged provision which had been made for her as inadequate; she was the deceased’s long-term partner for whom no provision had been made.
Outside of the plaintiff’s control was the fact that, despite reaching a settlement agreement with the defendant, that settlement failed to obtain approval of the Court which further delayed resolution of the proceeding.
The Court was eventually required to determine the value of assets of the estate, including whether unpaid rent relating to one of the beneficiaries living in an estate property was an estate asset. The Court was also required to determine the value of the liabilities of the estate, such as the capital gains tax referred to above.
The parties’ approach to the question of the witnesses’ evidence has, however, caused concern to the Court. Notwithstanding early indications from the Court that viva voce evidence was not justified having regard to the limited issue in dispute, that is, the precise quantum of provision to be made to the plaintiff, it appears that significant time and costs were incurred in this respect. This included the parties attending at directions hearings, conferring over joint trial documents when trial estimates could not be agreed, and the defendant making arrangements for Scottish witnesses to testify remotely.
There was approximately a year between the bringing of the Part IV proceeding and the initial date for the trial of the proceeding. The contemporaneous correspondence and orders of the Court support the plaintiff’s submission that the delay was attributable to the failure of the parties to agree on the estimated length of the trial, with the Court noting on two occasions that the length of the trial could be reduced by the parties agreeing to affidavits filed in the proceeding standing as witnesses’ evidence in chief.
WJM submits that the lengthy estimated trial duration was primarily due to the defendant’s insistence on leading viva voce evidence from seven lay witnesses. However, this submission is not made out. The first joint trial document filed 8 April 2019 reveals the plaintiff’s anticipated timetable for hearing totalled four days, while the defendant’s anticipated timetable totalled two days. The second joint trial document filed 30 April 2019 records it was the parties’ joint intention that the evidence of some witnesses be given from Scotland via video link. On that basis, the joint anticipated timetable totalled four days.
Mr Jolly deposes that between 3 May 2019 and 29 May 2019, the plaintiff’s position was that affidavits should stand as evidence in chief and that the defendant opposed that position. However, the third joint trial document filed 29 May 2019 records: ‘The parties agree that it is appropriate for evidence in chief to be given viva voce at the hearing …’. The anticipated timetable on that basis totalled four days.
It was on 13 June 2019, in response to a communication from the Court indicating the estimates were excessive in the circumstances, that Mr Jolly recorded the plaintiff’s position as being that the trial duration could fit within two days, if affidavit evidence was used as evidence in chief. Consent orders filed 22 April 2020 provided for a trial estimate of two to three days, with correspondence of 6 August 2020 explaining the estimate allowed for evidence to be given via video link.
It is notable that the comprehensive list of agreed facts contained in the third joint trial document and ultimately relied on at the one day trial in September 2020 remained unchanged from the first joint trial document filed on 8 April 2019. In light of this, the Court views with some scepticism, the submission that preparatory work performed in mid-2019 was ‘largely wasted’.
The Court considers that at no point has the benefit reasonably expected to be achieved by the giving of viva voce evidence been clearly articulated and the insistence on viva voce evidence was not justified having regard to the limited issue in dispute and the substantially agreed facts. As demonstrated above, this is not attributable solely to the defendant. Although these matters are of concern, on balance, in light of WJM’s compliant costs agreement and disclosure statement, these concerns are insufficient in the circumstances to conclude that the costs were not proportionately incurred.
Consideration of CRL’s costs
Disclosure
There is no satisfactory evidence that CRL made written disclosure to the defendant which complies with the requirements of s 174(1) and (2) of the LPUL. Mr Black deposed that he could not be certain whether a costs agreement and disclosure statement were prepared and misfiled, or never prepared. The defendant has not been able to locate a copy of these documents in his records. Other written disclosures relied on by CRL amount to ‘practical disclosure’, such as tax invoices for work already completed, do not satisfy the LPUL’s requirement for an initial estimate and updated estimates to be given in writing.[22]
[22]See, eg, Johnston v Dimos Lawyers (2019) 59 VR 16, [19] (Wood AsJ).
The disclosure obligations imposed by the LPUL are clear. Section 174 makes it plain that disclosure must be in writing and must contain prescribed information. The fact that the defendant was otherwise aware of the extent of costs incurred by the estate and does not dispute the legal fees and disbursements charged does not relieve CRL of its obligations under the LPUL.
There is either compliance with the provisions relating to disclosure, or non‑compliance; there is no concept of substantial compliance.[23] CRL is clearly in breach of its disclosure obligations. Accordingly, by operation of s 178(1), there is no valid costs agreement and the defendant is not required to pay CRL’s legal costs until they have been assessed.
Reasonable and proportionate costs
[23]See, eg, ibid [20] (Wood AsJ).
CRL does not have the benefit of prima facie evidence in the form of a valid costs agreement and costs disclosure statement that complies with the relevant divisions of the LPUL, that its costs are fair and reasonable. Further, in the absence of a costs disclosure statement and costs agreement, it is not possible to identify what hourly rate has been charged for professional fees or what time units have been attributed to particular tasks. In those circumstances, there is no ability to assess if the work undertaken and corresponding fees were reasonable.
Accepting that in a number of respects the administration of the estate and the conduct of the Part IV claim were not straightforward, the Court nevertheless maintains its concerns that the quantum of costs which were to be claimed by CRL are very high.
As mentioned, of particular concern to the Court in this case is the approach of the parties to the question of the witnesses’ evidence.
CRL submits that costs associated with witnesses giving evidence from Scotland were reasonably and necessarily incurred at the time, as it was not until 8 September 2020 that the plaintiff informed the defendant and the Court that she did not intend to cross-examine these witnesses. A review of the correspondence reveals, however, that it was the consistent position of the defendant from June 2019 up to 11 September 2020, eleven days before trial, that short viva voce evidence in chief be given of the up to date circumstances of the beneficiaries. This position extended to seeking an adjournment of the trial, on the basis that such a delay would be ‘clearly outweighed’ by the benefit of the Court receiving that evidence.
At no stage was the relevant expected benefit of such an approach clearly articulated. In fact, the defendant did not provide further information to the plaintiff of the brief viva voce evidence sought to be led, nor lead supplementary evidence from the beneficiaries. Further, the settlement discussions between June and August 2019 and the terms dated 15 August 2019 took place without the benefit of any supplementary evidence from the beneficiaries. In circumstances where viva voce evidence was unnecessary and unjustified in light of the limited dispute between the parties and could be assessed in that light at the time,[24] costs incurred in that respect were not proportionately or reasonably incurred.
[24]See, eg, Williams v AusNet (n 21) [110]–[111] (Emerton J).
CRL does not have a valid costs agreement and should have thought better of subjecting the estate to professional fees of $121,217 in the absence of a valid costs agreement. On balance, the Court cannot be satisfied that the costs that CRL sought to charge were reasonable and proportionate.
Conclusions
The Court will order that:
(a) Pursuant to r 63.65 of the Supreme Court (General Civil Procedure) Rules 2015, the costs of CRL of this proceeding be referred to the Costs Court to be taxed according to the appropriate scale as determined by the Costs Court.
(b) CRL file a summons for taxation within 14 days of this order.
(c) The costs of WJM in providing further evidence as to costs and costs submissions be borne by WJM and the costs of CRL in providing further evidence as to costs and costs submissions and the costs of the taxation of CRL’s costs be borne by CRL.
(d) The plaintiff receive 40 per cent of the estate available for distribution, however, that amount cannot be calculated until the costs of sale of the Darriwill Street unit,[25] the capital gains tax and associated accountant’s fee are finalised and the quantum of the legal costs of CRL are determined.
[25]See Reasons [127].
(e) On or before 17 December 2021 CRL file and serve an update as to the finalisation of the administration of the estate of the deceased.
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