Smoel and Wooster v Piper Alderman (No 2)
[2016] VSC 237
•13 May 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2014 01696
| KERRYN LINDA SMOEL and SUSAN CAROLYN WOOSTER (in their capacity as trustees of the Morris Family Superannuation Fund) | Applicants |
| v | |
| PIPER ALDERMAN | Respondent |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 17 July, 14 August, 30 October 2015 |
DATE OF JUDGMENT: | 13 May 2016 |
CASE MAY BE CITED AS: | Smoel & Wooster v Piper Alderman (No 2) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 237 |
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COSTS — Application to review costs — Whether respondent’s bills are lump sum bills or itemised bills — Re Taylor, Stileman & Underwood [1891] 1 Ch 590 — Malleson Stawell and Nankivell v Williams (1930) VLR 410 — Stevens v Keogh (Unreported, Supreme Court of Victoria, McDonald J, 3 December 1996) — Clayton Utz Lawyers v P&W Enterprises Pty Ltd [2011] QDC 5— Legal Profession Act 2004, s 3.4.38 — Supreme Court Act 1986, s 17D — Supreme Court (General Civil Procedure) Rules 2005, r 63.42.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr P Lovell | Castra Legal Costing Pty Ltd |
| For the Respondents | Mr M Bearman | Piper Alderman |
HER HONOUR:
Background
The respondent (‘Piper Alderman’) was the firm of solicitors that acted for the former trustees[1] of the Morris Family Superannuation Fund (the ‘MFSF’) in a proceeding concerning a binding death benefit nomination dated 18 March 2008 in favour of the applicants in respect of all of the interest of their deceased father in the MFSF (‘the superannuation proceeding’).[2]
[1]Mrs Morris, Mr Ashman and then Upper Swan Nominees Pty Ltd.
[2]Wooster v Morris [2013] VSC 594 (1 November 2013).
As a result of the findings in the superannuation proceeding, the former trustee of the MFSF was removed and the applicants became the trustees of the MFSF.[3]
[3]Smoel & Woosterv Piper Alderman [2015] VSC 256 (5 June 2015) [11].
In acting as the solicitors for the former trustees in the superannuation proceeding, Piper Alderman charged costs of $329,605.22 (incl. GST) for the period 13 January 2012 to 12 December 2013 which were paid from the deceased father’s share of the MFSF.[4]
[4]Wooster v Morris [2013] VSC 594 (1 November 2013) [95]. The professional fees of Piper Alderman were paid save for $17,875 in its last account for professional fees dated 30 August 2013. There are also unpaid disbursements of $39,765.05 being counsel’s fees and transcript fees as set out in the account dated 30 August 2013.
Pursuant to s 3.4.38 of the Legal Profession Act2004 (‘the Act’),[5] the applicants seek to review Piper Alderman’s costs of $329,605.22 as contained in 22 tax invoices with attached attendance schedules.[6]
[5]The legislation applicable to the review.
[6]The tax invoices dated 30 January and 29 February 2012 were rendered pursuant to a costs agreement dated 16 November 2011 with the balance rendered pursuant to a costs agreement dated 16 February 2012. Piper Alderman originally charged the former trustees of the MFSF a total of $346,128.60 in legal fees as contained in 23 tax invoices. The amount has been reduced by Piper Alderman by $16,523.38 thereby making its total claim $329,605.22 as contained in 22 tax invoices.
The 22 attendance schedules detail Piper Alderman’s professional fees calculated on the basis of hourly rates charged in units of six minutes or part thereof. In 15 of the 22 tax invoices, Piper Alderman has discounted its professional fees as detailed in the attendance schedules by 50 per cent, charging a total of $208,344.50 (excl. GST) instead of $408,914.50 (excl. GST).[7]
[7]These amounts exclude disbursements, some of which were also charged at 50 per cent.
Initially, Piper Alderman disputed the standing of the applicants to review its costs. The question of standing was referred by Associate Justice Wood to a judge for directions under r 63.51 of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’).[8] The standing question was determined in favour of the applicants in reasons delivered on 5 June 2015.[9]
[8]These Rules have been superseded by the Supreme Court (General Civil Procedure) Rules 2015.
[9]Smoel & Wooster v Piper Alderman [2015] VSC 256 (5 June 2015) (McMillan J).
Further issue raised by Piper Alderman
After judgment on the standing issue was delivered, Piper Alderman contended for the first time that the 22 tax invoices rendered to the former trustees are lump sum bills.
If the tax invoices are lump sum bills, Piper Alderman would have to prepare itemised bills for the purposes of the review of the costs. If the quantum of those itemised bills exceeded $329,605.22 on the review of the costs, Piper Alderman would no longer be bound by the amounts in the lump sum bills.[10]
[10]Pursuant to s 3.4.43(2) of the Act.
Applicable principles
Division 6 of Part 3.4 of the Act refers to lump sum bills or itemised bills. Pursuant to s 3.4.2 of the Act:
(a)a lump sum bill means ‘a bill that describes the legal services to which it relates and specifies the total amount of the legal costs’; and
(b)an itemised bill means ‘a bill that specifies in detail how the legal costs are made up in a way that would allow them to be reviewed under Division 7’ of Part 3.4 of the Act.[11]
[11]Division 7 of Part 3.4 of the Act is headed ‘Costs Review by Costs Court’.
Apart from these definitions, the Act does not expressly specify the content of an itemised bill. The content of a bill of costs for taxation is found in r 63.42 of the Rules which specifies as follows:[12]
[12]A costs review under Division 7 of Part 3.4 of the Act is governed by Parts 5 and 6 of Order 63 of the Rules.
63.42 Content of bill of costs
(1) In a bill of costs for taxation under this Order charges and disbursements shall be set out in separate columns, and the amounts in each column shall be totalled at the foot of each page and the total carried forward to the top of the next page.
(2) The bill shall contain—
(a) items numbered in chronological order describing briefly the work done by the solicitor for the party entitled to costs, and stating beside each item the amount claimed for the work and the amount of any disbursement made;
(b) at the conclusion of the chronological description of the work done, a description, having regard to the matters referred to in Rule 63.48, of work done justifying an allowance under Appendix A of the amount claimed beside that item;
(c) disclosure of the actual hourly rates charged to the party.
…
(4) Where work for which costs are claimed was done by a clerk of the solicitor and that fact is relevant to the amount of costs allowable for the work, the name and position of the clerk shall be stated in the bill.
The failure to comply strictly with the content of an itemised bill is an irregularity, rather than a nullity.[13] In addition, pursuant to s 17D(4) of the Supreme Court Act 1986, the Costs Court regulates its own procedure. Pursuant to s 17D(3) of that Act, the Costs Court must exercise its jurisdiction with as little formality and technicality, and with a much expedition, as the requirements of the Supreme Court Act1986, the Rules and the proper consideration of the matters before the Court permit. The provisions of ss 24 and 25 of the Civil Procedure Act 2010 also support the avoidance of unnecessary technicality and expense as long as justice between the parties can be maintained.
[13]The Rules, r 2.01.
To be a bill in taxable form, that is, a bill capable of being reviewed under Division 7 of Part 3.4 of the Act, a bill of costs must specify in sufficient detail the work done and the amounts charged for each service so that the person receiving the bill can make up his or her own mind or obtain advice as to whether or not the charges for work are reasonable.[14] In order to comply with the Act, a lump sum bill must still describe the legal services provided, even if in very general terms. In the Victorian decision of Stevens v Keogh, McDonald J held:
… a bill of costs drawn in a lump sum needs to set out a description of the work that has been performed … and the total sum charged for that work … As it is a bill drawn as a lump sum it will not set out the sum charged against each item or work identified or described.
The fact that a bill of costs may be drawn in a lump sum as distinct from in taxable form does not alter the requirement that the bill must contain sufficient details to inform the client of the work performed, the subject of the bill, sufficient to enable those acting for him to advise him whether a bill drawn in taxable form should be requested.[15]
[14]Re Taylor, Stileman & Underwood [1891] 1 Ch 590.
[15]Stevens v Keogh (Unreported, Supreme Court of Victoria, McDonald J, 3 December 1996) 10–11.
In the Queensland decision of Clayton Utz Lawyers v P&W Enterprises Pty Ltd[16] Reid DCJ considered the meaning of the definition of ‘itemised bill’, including the statutory definition of an itemised bill under the relevant provisions of the Legal Profession Act2007 (Qld), which are almost identical to the equivalent provisions in the Victorian Act. His Honour cited with approval the oft-quoted statement of Mann J in Malleson Stawell and Nankivell v Williams:
Courts have repeatedly held that a bill of costs must contain such details as will enable the client to make up his mind on the subject of taxation, and will enable those advising him to advise him effectively as to whether taxation is desirable or not.[17]
[16][2011] QDC 5 (28 January 2011).
[17] [1930] VLR 410 cited in Re Walsh Halligan Douglas’ Bill of Costs (1990) Qd R 288, 294 (Dowsett J).
His Honour also referred to the English decision of Ralph Hume Garry v Gwillim (CA)[18] where Ward LJ stated:
The test, it seems to me, is…not whether the bill on its face is objectively sufficient, but whether the information in the bill supplemented by what is subjectively known to the client enables the client with advice to take an informed decision whether or not to exercise the only right then open to him, viz, to seek taxation reasonably free from the risk of having to pay the costs of that taxation.[19]
[18] Clayton UtzLawyers v P&W Enterprises Pty Ltd [2011] QDC 5 (28 January 2011) [30] (Reid DCJ).
[19] Ralph Hume Garry v Gwillim (CA) [2002] EWCA Civ 1500; (2003) 1 WLR 510, 522.
Are Piper Alderman’s bills of costs itemised or lump sum bills?
For the reasons set out below, Piper Alderman’s tax invoices with the attached attendance schedules are itemised bills, specifying with sufficient detail how its’ legal costs are made up in a way that would allow them to be reviewed by the Costs Court. The review is to be conducted on the basis of the fees charged by Piper Alderman as discounted by 50 per cent.
The first two tax invoices dated 30 January 2012 for $2,034.45 (incl. GST) and 29 February 2012 for $4,600.04 (incl. GST) charged professional fees quantified in accordance with a costs agreement dated 16 November 2011. These two invoices do not show the hourly rate of the fee earner but do show the initials of the fee earner, the time spent on each item and a description of the work done. These two tax invoices total $6,634.49 out of a claimed amount of $329,605.22. The tax invoice dated 30 January 2012 has ten entries totalling 4.6 hours. The tax invoice dated 29 February 2012 has 43 entries totalling 9.6 hours. The details of the hourly rate of the respective fee earners can be easily ascertained from the costs agreement.
The further 20 tax invoices the subject of this proceeding were billed pursuant to a costs agreement dated 16 February 2012 and, in most instances, the professional fees as itemised in the attendance schedules were reduced by 50 per cent. Of the 20 tax invoices issued, 19 record the amount of the costs plus GST and, in many cases, an amount for disbursements. The attendance schedules attached to these 19 invoices set out the date that the work was done, the fee earner’s name and position, the time spent doing the work, the charge out rate for the work, the dollar value of each item and the particulars of the work, with specific dollar amounts allocated to each claimed item.
In the usual course of a costs review, the items in the attendance schedules would, if subject to objection, be reviewed by reference to the files of Piper Alderman. Although the descriptions in the attendance schedules are brief, they do more than just describe the legal services with a total amount specified for the professional fees. A lump sum bill would not ordinarily specify this amount of detail.
In the remaining invoice that includes professional fees charged by Piper Alderman, dated 26 March 2013, the particulars of the attendance schedule are redacted whereas the other attendance schedules included particulars: for example, ‘Research on cases in relation to the interpretation of trust deeds’. The attendance schedules annexed to the 26 March 2013 tax invoice include limited particulars: for example, ‘Reading and considering’ or ‘Perusal of’. These entries are dated between 25 February 2013 and 22 March 2013 and detail professional costs of $20,341 (excl. GST), which were invoiced to the client at a 50 per cent discount of $10,170.50. The Special Referee’s report was delivered on 7 March 2013 and falls within the timeframe of this tax invoice. It is likely that the work done in this timeframe, if objected to, would be discernible by looking at Piper Alderman’s file notes, as well as correspondence received by the client.
To the extent that there is no numbering in the attendances schedules, this is a simple task that can be done by applicants in chronological order by hand prior to filing and serving a notice of objections. The lack of sub-totals in the bills would not impede the review process as they can be added by hand. The disbursements, which are mostly photocopying, can be taxed by reference to the production of receipted invoices, if done by an external provider. The remaining disbursements are counsel’s fees and can be taxed by reference to counsel’s backsheets and tax invoices.
Consistent with the conclusion of Ward LJ in Ralph Hume Garry Gwillim (CA), referred to in Clayton Utz Lawyers v P&W Enterprises Pty Ltd,[20] the particulars of the charges in the tax invoices and attendance schedules are sufficient to enable the applicants to obtain advice and make an informed decision on the nature of and the reasonableness of the charges and whether or not to exercise their rights to seek a review of the costs reasonably free from the risks of having to bear the costs of the taxation.
[20][2011] QDC 5 (28 January 2011) [30] (Reid DCJ).
Other Matters
Piper Alderman has elected to render its tax invoices with attendance schedules providing particulars of its professional fees on an item by item basis. It now contends that those same bills do not comply with the statutory definition of ‘itemised bill’ in order to seek a benefit by charging additional costs of more than $200,000. Such a position does not sit comfortably with the characterisation of the Act as protecting the consumer.[21]
[21]Russells Solicitors v McCardel [2014] VSC 287 (23 June 2014) [8], [98] (Bell J).
Piper Alderman could have, but did not, render its tax invoices noting that their professional fees as detailed in the attendance schedules were discounted and reserving its right to rely on the higher amounts in the attendance schedules on a costs review or if the costs were not paid within a specified time. It did not specify that the tax invoices with the attached attendance schedules were not itemised bills for the purposes of the Act. The only matter it did state was that it reserved its right to serve on the client
… a detailed bill in the event [of] non payment and if the detailed bill is for a greater amount than this bill you are liable for the greater amount.
The term ‘detailed bill’ is not used in the Act or the Rules. Considering the content and detail provided in Piper Alderman’s tax invoices with the attached attendance schedules, it would be difficult for the client understand that they were not detailed bills or, in this case, itemised bills. Now that the applicants seek to review those fees, Piper Alderman is attempting to rely on the deficiencies in the form and content of its tax invoices to resile from the amounts charged in those tax invoices. In any case, the professional fees of Piper Alderman were paid, save for $17,875 in its last account for professional fees dated 30 August 2013, making the reservation inapplicable.
Although unrelated to the specific question addressed in these reasons, the superannuation proceeding concerned an amount of $924,509. Piper Alderman’s clients, the former trustees, were unsuccessful in their defence of the superannuation proceeding. In acting for the former trustees, Piper Alderman charged $329,605.22 for the period 13 January 2012 to 12 December 2013. On the hearing of the issue of the standing of the applicants to seek a costs review, an oral application by Piper Alderman was made, but refused, to include a further amount of $160,000 for its unbilled professional fees for work allegedly done since March 2013.[22] This oral application seems inconsistent with the tax invoices as they show that Piper Alderman charged costs up to 12 December 2013.
[22]Smoel & Wooster v Piper Alderman [2015] VSC 256 (5 June 2015) [70]–[71].
On this application, Piper Alderman is seeking to include a further amount for its professional fees of at least $200,000, being the difference between its professional fees assessed at the full rate and the discounted amounts charged in its tax invoices. This amount, together with the alleged unbilled fees of $160,000, means that the quantum of Piper Alderman’s fees in acting in the superannuation proceeding would be approximately $690,000 in a claim quantified at $924,509. If that is the case, such an amount for professional fees could not be said to be reasonable or proportionate to the issues that were in dispute in the superannuation proceeding.
Conclusions
Piper Alderman’s tax invoices with the attached attendance schedules are itemised bills to be reviewed by the Costs Court, such review to be conducted on the basis of the discounted fees charged by Piper Alderman.
I will hear the parties as to the further directions to be made for the costs review.
Subject to any costs submissions, my view is that Piper Alderman pay the applicants’ costs of the applicants of this application, to be taxed on the standard basis in default of agreement.
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