Reardon v Hall & Wilcox
[2016] VSC 188
•3 May 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2015 5259
| REARDON | Plaintiff |
| v | |
| HALL & WILCOX | Defendant |
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JUDGE: | McDONALD J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 18 April 2016 |
DATE OF JUDGMENT: | 3 May 2016 |
CASE MAY BE CITED AS: | Reardon v Hall & Wilcox |
MEDIUM NEUTRAL CITATION: | [2016] VSC 188 |
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COSTS – Non-associated third party payer sought information from solicitors for purpose of determining whether to apply for costs review – Solicitors provided redacted invoices for entries subject to claims for legal professional privilege – Sufficient information provided – Legal Profession Practice Act 2004 ss 3.4.2A(1), 3.4.38(7), 3.4.45; Supreme Court Act 1986 s 36; Supreme Court (General Civil Procedure) Rules 2015 r 32.05.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C R Brown | Aitken Partners |
| For the Defendant | Mr H N G Austin | Hall & Wilcox |
HIS HONOUR:
In July 2011, Mrs Reardon executed a mortgage in favour of the Bendigo and Adelaide Bank Limited (‘the Bank’) in respect of a property at 858 Drummond Street, Carlton North (‘the property’). Mrs Reardon defaulted on the terms of her loan with the Bank. Under the terms of the mortgage the Bank was entitled to debit Mrs Reardon’s loan account for the legal costs invoiced to the Bank, by Hall & Wilcox, relating to the enforcement of the mortgage. Consequently, Mrs Reardon is a non-associated third party payer within the meaning of s 3.4.2A(1) of the Legal Profession Act 2004 (Vic) (‘LPA’).
Section 3.4.38(7) of the LPA provides:
If the third party payer is a non-associated third party payer, the law practice must provide the third party payer, on the written request of the third party payer, with sufficient information to allow the third party payer to consider making, and if thought fit to make, an application for a costs review under this section.
For the purposes of this proceeding, Mrs Reardon’s loan account was relevantly debited $26,337.01 (inclusive of GST) in respect of legal costs invoiced to the Bank relating to the enforcement of the mortgage. On 16 September 2015, Mrs Reardon’s solicitors, Aitken Partners, wrote to Hall & Wilcox requesting information in accordance with s 3.4.38(7) of the LPA.[1]
[1]D2: Affidavit of Natasha Toholka affirmed 1 March 2016, “NT-3”.
In December 2015, Hall & Wilcox provided Aitken Partners with 12 invoices in respect of the $26,337.01 debited to Mrs Reardon’s loan account. These invoices contained redactions in respect of 20 entries which were the subject of legal professional privilege claims by the Bank. Subsequently, 2 of the claims were not pressed, leaving 18 partly redacted entries. These entries and the basis of the claims made in respect of them are annexed to this judgment as Annexure A.
I have concluded that the information provided to Mrs Reardon, albeit containing redactions in respect of claimed legal professional privilege, is sufficient information within the meaning of s 3.4.38(7) of the LPA.
Jurisdiction
By her statement of claim dated 8 October 2015, Mrs Reardon sought orders that Hall & Wilcox provide unredacted copies of the following documents:
(a) all costs agreements entered into between the Bank and the defendant in relation to the legal work carried out, and disbursements paid, touching upon matters which concluded with the sale by the Bank of the property pursuant to which the defendant billed the Bank; and
(b) copies of all invoices the defendant rendered to the Bank, pursuant to those costs agreements, with sufficient detail to allow the plaintiff to consider making an application for costs review arising from the matters which concluded with the sale of the property by the Bank.
During the course of the hearing on 18 April 2016, I sought submissions from counsel as to the source of the Court’s jurisdiction to make orders for the production of the documents as set out above. I referred the parties to the judgment of Emerton J in Gadens Lawyers v Beba Enterprises Pty Ltd,[2] in which her Honour held that the Costs Court has jurisdiction to make an order of the type sought by Mrs Reardon.[3] Her Honour was of the view that ‘the legislature could not have intended that responsibility for one small part of the review process, albeit one that may be anterior to any application for costs review, be taken out of the hands of the Costs Court and vested in the judges of the Trial Division.’[4] This raised a question as to whether, as a judge in the Trial Division, I had power to make orders for the production of the documents as set out above.
[2][2012] VSC 519.
[3]Ibid [22].
[4]Ibid.
Ultimately, it is not necessary for the Court to determine this issue. By consent, Mr Brown, who appeared for the plaintiff, sought and was granted leave to amend the prayer for relief in the statement of claim to seek:
[A] declaration that exhibits “NT 12” and “NT-13” to the affidavit of Natasha Toholka sworn 1 March 2016, do not constitute sufficient information to allow the Plaintiff to consider making and if thought fit to make an application for a costs review under s 3.4.38(7) of the Legal Profession Act 2004.[5]
[5]Amended Statement of Claim dated 20 April 2016, 4.
Exhibits “NT-12” and “NT-13” comprise the 12 invoices in respect of the $26,337.01 debited to Mrs Reardon’s loan account. No relief other than the declaration and costs is sought.
Whilst there may have been some question as to this Court’s power to order the production of the documents pursuant to s 3.4.38(7) of the LPA, given that it is a matter within the jurisdiction of the Costs Court, there is little doubt that the Court has a very wide power pursuant to s 36 of the Supreme Court Act 1986 to grant, if minded to do so, a declaration in the terms of the amended prayer for relief.[6]
[6]XX v WW and Middle South Area Mental Health Service [2014] VSC 564, [45].
Sufficient information
Shortly stated, Mrs Reardon’s complaint is that the provision to her of invoices containing redactions of matters in respect of which the Bank claims legal professional privilege does not constitute sufficient information to allow her to consider making, and if thought appropriate to make, an application for a costs review under the LPA. Whether Mrs Reardon has been provided with sufficient information turns upon a question of statutory construction; in particular, the meaning of the expression ‘sufficient information’ in s 3.4.38(7) of the LPA.
I was informed by both counsel that the Supreme Court of Victoria has not previously considered the meaning of the expression ‘sufficient information’ in s 3.4.38(7) of the LPA.
The expression ‘sufficient information’ appears, for example, in r 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 in respect of applications for preliminary discovery:
Where—
…
(b)after making all reasonable inquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; …
Whilst arising in a different context, it is well established for the purpose of r 32.05(b) of the Rules that the test of whether a party does or does not have sufficient information is objective.[7] Likewise, for the purposes of s 3.4.38(7) of the LPA, the question of whether a third party payer has sufficient information to consider making, and if thought fit to make, an application for a costs review, is objective. Accordingly, the mere fact that Mrs Reardon contends that the information which has been provided to her is insufficient is not determinative.
[7]See, for example, Beston Parks Management Pty Ltd v Sexton [2008] VSC 392, [55] and [65].
In the context of r 32.05(b) of the Rules, it has also been held ‘that there may be a subjective element, in the sense that if there is evidence that the applicant has in fact decided to commence proceedings, that will be fatal to the application.’[8] In the present case it is noteworthy that Mrs Reardon had previously applied to the Costs Court in 2014 for a review of costs under s 3.4.38 of the LPA, including in respect of the partly redacted invoices that are now under consideration.[9] At the time, ‘the invoices had not been provided to Mrs Reardon … [so] she brought a costs review on less information than she now has.’[10] That application was discontinued.
[8]Ibid [56], citing Alphafarm Pty Ltd v Eli Lilly Australia Pty Ltd (Unreported, Federal Court of Australia, 24 May 1996).
[9]Transcript of Proceedings, Reardon v Hall & Wilcox (A Firm) (Supreme Court of Victoria, S CI 2015 5259, McDonald J, 18 April 2016) T3 LL14-26, T4 LL15-21.
[10]Ibid T80 LL12-15.
There is a significant difference between a party being provided with ‘sufficient information’ compared to ‘all available information’ which would allow a party to consider making, and if they thought appropriate to make, an application for a costs review. The question of whether the information provided to Mrs Reardon is sufficient for the purposes of s 3.4.38(7) involves questions of degree. In its ordinary meaning, ‘sufficient’ means: ‘Of a quantity, extent or scope adequate to a certain purpose or object.’[11] The 12 invoices which contain redactions record legal costs totalling $26,337.01. The amount of costs attributable to the partly redacted items is $3,298.90.[12] Thus, the entries which are subject to redactions comprise 12.53% of the total costs which may be the subject of an application for a costs review.
[11]J A Simpson and E S C Weiner (eds), The Oxford English Dictionary (Clarendon Press, 2nd ed, 1989) vol XVII, 128.
[12]D2: Affidavit of Natasha Toholka affirmed 1 March 2016, [21].
The partly redacted invoices are exhibit “NT-12” to the affidavit of Natasha Toholka affirmed 1 March 2016. There are 18 entries in the invoices which contain redactions.[13] The entries still identify the date when work was undertaken, the person who undertook the work, the amount of time which was involved, the amount which was charged and also some description of the nature of the work which was undertaken: for example, ‘considering’, ‘drafting’, ‘telephone attendance’, ‘emails’, and ‘reviewing’.
[13]These are summarised in the Affidavit of Natasha Toholka affirmed 1 March 2016, [20].
The entries in the invoices in respect of the balance of $23,038.11 (87.47%) contain no redactions. Whilst there are redactions in respect of entries totalling $3,298.90, there is information provided in respect of the nature of the work which was undertaken. This is demonstrated by the redacted entry of 30 January 2014:
Telephone attendances on Gary Ragusa of the Sherriff’s Office and Rob Findlay. Emails to and from Gary Ragusa and Rob Findlay (privileged matters redacted).[14]
The invoice records that the work was undertaken by a named paralegal, involved 0.60 hours, and the amount billed was $135.00. Notwithstanding the redaction in respect of the matters which are the subject of a claim for privilege, this entry does provide sufficient information for the purposes of s 3.4.38(7) of the LPA. It identifies the nature of the work and the other parties to the telephone attendances and emails. Mr Brown submitted that in its redacted form, an entry such as this precluded Mrs Reardon from being able to assess whether fees were reasonable for the services provided. However, as I pointed out to Mr Brown, this is an argument which, if accepted by the Costs Court judge hearing a costs review, would likely translate into a disallowance of the claimed fees.[15]
[14]D2: Affidavit of Natasha Toholka affirmed 1 March 2016, “NT-12”, 19.
[15]Transcript of Proceedings, Reardon v Hall & Wilcox (A Firm) (Supreme Court of Victoria, S CI 2015 5259, McDonald J, 18 April 2016) T11 LL12-18, T17 L29 – T18 L8, T20 LL15-27.
Mrs Reardon filed two affidavits by a costs consultant, Ariel Weingart.[16] Neither of these affidavits support the conclusion that, in respect of the 87.47% of the costs not subject to redaction, Mrs Reardon lacks sufficient information to consider making and/or actually make an application for a costs review. There are criticisms of the adequacy of the descriptions for the work undertaken both in respect of the redacted and non-redacted sections of invoices. Mr Weingart opines ‘a significant number of items in most of the bills/tax invoices provide insufficient description of the work done.’[17] However, this does not address the issue raised by s 3.4.38(7) of the LPA.
[16]P1: Affidavit of Ariel Weingart sworn 4 April 2016 and P2: Affidavit of Ariel Weingart sworn 13 April 2016.
[17]P2: Affidavit of Ariel Weingart sworn 13 April 2016, “AW-2”, 4 [7].
If the Costs Court was to conclude, consistent with Mr Weingart’s stated opinion, that the entries in invoices were too general to allow a conclusion to be formed as to whether the fees are reasonable for the services provided, this is likely to be a matter which will weigh in favour of Mrs Reardon on any costs review. Prima facie, Mr Weingart’s opinion is a matter which would justify Mrs Reardon coming to the conclusion that she should seek a costs review.
The test of sufficient information is not directed to the question of whether the information provided allows for a definitive assessment of whether fees charged are reasonable for the services provided. Rather, the information provided must permit a non-associated third party payer to make an assessment of whether there is a proper basis for commencing a costs review.[18]
[18]Cf Civil Procedure Act 2010 s 18(d).
Mr Brown, who appeared for Mrs Reardon, sought to rely upon the ‘15% rule’ in s 3.4.45 of the LPA. Section 3.4.45(2) provides:
Unless the Costs Court otherwise orders and subject to subsection (3), the law practice to which the costs are payable or were paid must pay the costs of the review if –
(a)on the review the legal costs are reduced by 15% or more; or
(b)the Costs Court is satisfied that the law practice failed to comply with Division 3.
Mr Brown submitted that, as the invoices containing redactions relate to 12.53% of the amount of costs in issue, Mrs Reardon would need access to invoices in unredacted form in order to make an assessment of whether or not she has a prospect of successfully invoking the 15% rule in any costs review. Mr Brown submitted that, if she is provided with invoices in an unredacted form, Mrs Reardon may well conclude that the costs were properly incurred. This would be a strong disincentive to bring an application for a costs review.
To date, the Bank has strongly resisted full disclosure of invoices which have hitherto been redacted. This is with two exceptions. First, two of the invoices which have been the subject of redactions were provided to Mrs Reardon shortly prior to the hearing before me in an unredacted form. Secondly, an offer was made to provide unredacted invoices to Mrs Reardon’s costs consultant only.[19] In circumstances where the Bank, doubtless acting on advice, has strongly maintained the position of non-disclosure to Mrs Reardon and her lawyers, it seems unlikely that the Bank would change its position during the course of any costs review. If it were to do so, having regard to the history of the matter, any such change in position would be likely to have cost consequences. Prima facie, absent a cogent explanation, a question would arise as to whether such a change of position enlivens ss 20, 22 and 23 of the Civil Procedure Act 2010.
[19]Transcript of Proceedings, Reardon v Hall & Wilcox (A Firm) (Supreme Court of Victoria, S CI 2015 5259, McDonald J, 18 April 2016) T28 LL19-22.
I do not consider that the 15% rule contained in s 3.4.45 of the LPA constitutes a benchmark such that wherever redactions of invoices relate to approximately 15% of the amount in issue, the non-associated third party payer will be deemed to have not been provided with sufficient information for the purposes of s 3.4.38(7) of the LPA. In the present case, the invoices (including those which are partly redacted) provide information to Mrs Reardon sufficient to make an assessment of whether she has a proper basis for commencing a costs review. Based on both the partly redacted and non-redacted invoices, Mr Weingart concluded that many entries did not allow him to form an opinion as to whether the fees were reasonable for the services provided. If the Costs Court comes to the same conclusion, fees which do not permit an assessment of whether they are reasonable for the service provided are likely to be disallowed.
Conclusion
The material which has been provided to Mrs Reardon in respect of the 87.47% of the costs in issue not subject to any redactions, together with the information which has been provided as part of the entries where there are redactions, does provide sufficient information to allow her to consider making, and if thought fit to make, an application for a costs review under s 3.4.38 of the LPA. The application must therefore be dismissed. I shall provide the parties with an opportunity to make submissions on costs.
Annexure A
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