Tomasevic v Nowicki Carbone

[2015] VSC 302

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

S CI 2014 05502

MILAN TOMASEVIC	Applicant
v
NOWICKI CARBONE AND JOHN KARANTZIS, PARTNER	Respondents

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JUDGE:	EMERTON J
WHERE HELD:	Melbourne
DATE OF HEARING:	16 June 2015
DATE OF JUDGMENT:	25 June 2015
CASE MAY BE CITED AS:	Tomasevic v Nowicki Carbone
MEDIUM NEUTRAL CITATION:	[2015] VSC 302

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COSTS – Whether just and fair to extend time to review bill – Legal Profession Act 2004, s 3.4.38(6)

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	In person	N/A
For the Defendant	Mr S L Freire	Blackstone Legal Costing Agents

HER HONOUR:

Introduction

1. This is an application for an extension of time in which to seek a review of legal costs under s 3.4.38 of the Legal Profession Act2004 (the ‘Act’).

1. On 10 October 2014, the applicant filed a summons for the review[1] of certain legal costs. On 12 March 2015, Wood AsJ ruled that the applicant had standing to apply to the Costs Court for a review of the costs.[2]  However, because of delay in bringing the application for review, the Court must now determine, having regard to the delay and the reasons for the delay, whether  it is just and fair for the Costs Court to carry out the review after the 12 month period has expired.[3]

   [1]Or ‘taxation’.

   [2]Tomasevic v Nowicki Carbone & Anor (unreported, 12 March 2015, Wood AsJ) (the ‘Ruling’).

   [3]Legal Profession Act2004, s 3.4.38(6).

Background

1. The applicant, Mr Tomasevic, commenced a common law proceeding on 4 March 2010 seeking damages for psychological injury due to bullying, intimidation, victimisation and harassment at the school at which he taught between 1999 and 2004.  He was initially represented by Clark, Toop and Taylor, but the conduct of his claim was taken over by the firm Nowicki Carbone in February 2011.

1. On 11 March 2011, the applicant entered into a Deed of Agreement with the Victorian branch of the Australian Education Union (the ‘Union’).  The Deed recited that the Union would pay legal expenses and costs up to $30,000 or such higher amount determined by the Union at its discretion.  It was agreed (pursuant to clause 1 of the Deed) that if the applicant received a payment in settlement of his legal action which was equal to or greater than the amount expended by the Union, the applicant would reimburse the Union for the amount upon request by the Union.

1. Nowicki Carbone acted for the applicant for approximately two years, but ceased to act for him on 27 March 2013.  During this period, there were a number of interlocutory hearings in which counsel were briefed for the applicant.

1. In about October 2013, a new firm of solicitors, Melbourne Injury Lawyers (‘MIL’) commenced acting for the applicant.  On 25 February 2014, MIL wrote to the Union, apparently requesting access to funds.  On 19 March 2014, the Union responded to MIL stating, among other things, the following:

Your request that the Australian Education Union, Victorian Branch (the AEU) provide funding to you in order to pursue common law damages on behalf of Mr Milan Tomasevic, cannot be met.

…

By April 2012, Mr Henderson [Branch Secretary] had already authorised payments to Nowicki Carbone totalling in excess of $25,000.  This funding is not self-renewing. Accordingly, the AEU has no intention to brief Melbourne injury Lawyers or any other firm, to continue to act on its behalf in this litigation.

It is the view of the AEU that no further expenditure in this matter can be authorised, and that the organisation has gone well beyond fully discharging its obligations to this particular member.

1. The letter from the Union was forwarded to the applicant on 27 March 2014.  The applicant has told the Court that this was the first knowledge he had that legal costs had been paid by the Union on his behalf.

1. The legal costs that the applicant seeks to review are disbursements for barristers’ fees invoiced by Nowicki Carbone.  The barristers’ fees total $25,020.  They were paid by the Union on various dates between February and May 2012.  The work for which the fees were charged is described in paragraph 31 of the Ruling.  The fees relate principally to an application made by the State of Victoria to strike out the applicant’s pleadings, and included an appeal from the decision of an Associate Judge at first instance to a judge in the trial division of the Supreme Court.

Is it fair and just to grant an extension of time?

1. Section 3.4.38(5) of the Act provides that an application for costs review must be made within 12 months after the bill was given or the request for payment was made, or if there was no bill or no request, within 12 months after the costs were paid. In the present case, the 12 month period expired in May 2013 (at the latest). The application for review of legal costs was therefore made almost 18 months out of time.

1. Section 3.4.38(6) of the Act provides for an extension of time to be given if the Court determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for review to be dealt with after the 12 month period.

1. In Dal Pont,[4] considerations that may influence the Court in its discretion to enlarge time are described as follows:

   [4]Law of Costs, 3^rd Edition, LexisNexis Butterworths, Australia, 2103.

·    The length of the delay, attached to which is the nature and degree of prejudice to the lawyer in allowing time to be enlarged, compared to the prejudice to the client in denying the application to extend time;

·    The reasons for the delay, specifically whether it is properly explicable;

·    Whether the client was aware of the right to seek costs assessment – which now in any case comes with costs disclosure obligations – and in this context, whether or not the client was represented is a relevant consideration;

·    Whether there is evidence suggesting that the bill might be excessive;

·    Whether the client has paid the bill without demur; and

·    The lawyer’s reasons for opposing the enlargement, it being important that, as an officer of the court, the lawyer is seen to act honestly, ethically and with proper motives, not merely to prevent the assessment of a bill taking place.[5]

[5]Ibid, pp 111-112 (citations omitted).

1. The respondent, Nowicki Carbone, opposes the grant of the extension of time on the basis that it would not be just and fair for the costs review to be dealt with by the Costs Court after the 12 month period.  Nowicki Carbone contends that:

(a)no adequate explanation for the delay has been given by the applicant;

(b)the costs review would be futile because any refund will be paid to the Union and the Union has made it quite clear that it has no intention of providing further funds for the applicant’s proceeding; and

(c)it would be unfairly prejudicial to the barristers to require them to justify their fees to the Costs Court at this late stage, particularly as they will have acted on the basis that there was no challenge to those fees and will have arranged their affairs accordingly.

1. The applicant gave an explanation for the delay, albeit from the Bar table.  He said that he did not know that most of the money made available by the Union had been spent until MIL informed him of this on 27 March 2014.  Up to that point, he believed that as Nowicki Carbone was acting on a ‘no win/no fee’ basis, it had covered all costs incurred in progressing his proceeding, including barristers’ fees.

1. The applicant told the Court that following the unhappy discovery that the Union funds had been largely exhausted, he started having problems with MIL, and MIL ceased to act for him shortly afterwards.  He said that for so long as MIL acted for him, he was not in a position to make an application to review the costs himself.  At the time, he was suffering severe depression.  This also affected his ability to apply for a review of costs once MIL had ceased acting for him.  In this context, I note that the applicant challenged the Court’s decision in June 2014 to allow MIL to cease acting for him, and that Hargrave J heard and determined the appeal on 9 September 2014.[6]  The summons for taxation was filed only a month later.

   [6]See Tomasevic v Melbourne Injury Lawyers [2014] VSC 434.

1. I am satisfied that the applicant has given a reasonable explanation for the delay given his particular circumstances.  Having learned of the existence and payment of the barristers’ fees in late March 2014, he could have moved straight away to initiate a costs review and he did not, but I take into account that his circumstances at the time were complex and distressing for him.

1. However, even when there is a satisfactory explanation for the delay, the Court must consider whether it is fair and just for the review to be dealt with in the Costs Court, having regard to all the circumstances, including the position of the respondent and, in this case, the barristers whose fees are to be reviewed.  The Court must consider the nature and degree of prejudice to the lawyers in allowing time to be enlarged, compared to the prejudice to the applicant in denying the application to extend time.

1. The work for which the barristers’ fees were charged was performed in 2011 and 2012 and payment was made more than three years ago.  As a result, there will be some inconvenience to the lawyers in responding to a costs review.  The barristers are not respondents to the summons for taxation, but they are likely to be asked to produce records to explain the quantum of their fees.  The barristers will also suffer prejudice associated with being exposed to the possibility of having some of their fees disallowed, in circumstances where they have long since received (and probably spent) the money.  There are good reasons why the legislation has imposed a 12 month time limit on making an application for costs review.  Legal practitioners are entitled to organise their affairs on the basis that a review is unlikely if requested more than 12 months after the bill has been given.

1. There will also be some inconvenience to Nowicke Carbone, who will have to attend the Costs Court and explain why it was reasonable to brief counsel in the applicant’s proceeding.

1. Having considered the number of invoices, the amount of costs invoiced and the nature of the work that has been invoiced, I do not think that either the barristers or Nowicki Carbone will be greatly inconvenienced by a review of the legal costs in question.  The amounts are relatively small and, with one exception, involve a appearances and preparation for appearances in this Court.  There are only a small number of appearances.  The task of establishing that the fees were fair and reasonable is not onerous.

1. Against this must be balanced the fact that if the review does not proceed, the applicant will be denied the opportunity to challenge the reasonableness of the fees paid on his behalf.  As noted in Dal Pont, it is important that lawyers are seen to act honestly, ethically and with proper motives, and not be seen to be preventing the assessment of a bill taking place.

1. As to whether any review will be futile because the Union has said it will not make any more monies available for the applicant’s proceeding, that is a matter about which the Court cannot make a determination on the evidence before it.  The letter of 19 March 2014 from the Union to MIL certainly conveys the impression that the Union does not want to have anything further to do with the applicant’s proceeding.  The applicant argued at length before me that the author of the letter was not authorised to decide such a matter.  While I consider this argument to be largely without merit (there being no indication that the author was not authorised by the Executive of the Union to write the letter), I could not conclude from the correspondence in evidence that further funding would necessarily be denied if the Union account were to be replenished in part.

1. In my view, the question of futility arises in a different way.  The applicant expressed only a half-hearted desire to challenge the quantum of the barristers’ fees in question.  When pressed on the issue of quantum he made some noises to the effect that the barristers did nothing for him (they apparently failed to successfully resist the strike-out application), and that he did not know how they could have charged so much.  The applicant’s real complaint is that Nowicki Carbone wrongfully requested (or directed) the Union to pay the barristers’ fees when, so he contends, those funds were to be quarantined so that they would remain available for the trial of his proceeding.  The applicant contends that Nowicki Carbone should have covered the disbursements itself and/or arranged for pro bono counsel to appear for him, in accordance with the ‘no win/no fee’ arrangement that had been agreed.

1. Apart from the brief grumble I have mentioned, the applicant did not contend that the barristers’ fees are unduly large or unreasonable, or that the matters in which the barristers were briefed did not warrant the briefing of counsel.  However, this is precisely what the Costs Court will consider on the summons for taxation.

1. Section 17D(1) of the Supreme Court Act1986 provides that the Costs Court has jurisdiction to hear and determine the assessment, settling, taxation or review of costs in all proceedings in the Court. Section 3.3.44(1) of the Act provides that in conducting a review of legal costs, the Costs Court must consider:

(a)       whether or not it was reasonable to carry out the work to which the legal costs relate;

(b)      whether or not the work was carried out in a reasonable manner; and

(c)       the fairness and reasonableness of the amount of legal costs in relation to the work.

1. The Costs Court has a limited jurisdiction and carries out a limited function in reviewing legal costs pursuant to a summons for review.[7]  In this case, the Costs Court will consider whether the barristers’ fees were fair and reasonable as to the amounts invoiced (and paid) and whether it was reasonable for Nowicki Carbone to have retained counsel to perform the type of work in question. Whether Nowicki Carbone breached some kind of agreement with the applicant concerning the use of the Union funds is a different matter altogether.  That is not a question that the Costs Court can or should resolve.  It is a matter for a separate proceeding.

   [7]Or taxation.

1. The Costs Court has found the conditional costs agreements between the applicant and Nowicki Carbone to be void. However, that does not mean that the applicant has no liability for legal costs (including disbursements). Section 3.4.19 of the Act provides that where there is no costs agreement, legal costs are recoverable ‘according to the fair and reasonable value of the legal services provided’. Nowicki Carbone was entitled to recover its costs (including disbursements) according to the fair and reasonable value of the services provided. The question for the Costs Court will be whether the barristers’ fees were fair and reasonable.

1. It therefore appears to me to be highly unlikely that the applicant will achieve on a summons for costs review[8] in the Costs Court what he seeks to achieve, which is to have Nowicki Carbone repay the $25,020 to the Union so that funds become available through the Union to enable a new firm of solicitors to conduct his litigation.

   [8]Or taxation.

1. Having regard to the claims made by the applicant and the limited jurisdiction of the Costs Court, there is a real argument that it would not be fair and just to subject the lawyers in question to a costs review that the applicant may seek to divert into a broad-ranging inquiry into the conduct of his lawyers.

1. However, despite the strong doubts that I have about whether the applicant can obtain what he wants by way of a review of barristers’ fees in the Costs Court, and despite my concerns about the applicant’s willingness to accept the limitations of a costs review by the Costs Court, I have decided to grant the extension of time under s 3.4.38(6) of the Act. The inconvenience to the barristers and Nowicki Carbone of a costs review is relatively trifling, the applicant has explained the delay, the delay is not great and, finally, the applicant has expressed a desire to challenge the quantum of the costs, albeit in a half-hearted way. In the circumstances, it is just and fair that the applicant be permitted to subject the quantum of the legal costs in issue to scrutiny by the Costs Court.

1. Finally, although the applicant seeks compensation for pain and suffering as a result of the alleged conduct of Nowicki Carbone, such an application cannot be entertained in the context of an application for an extension of time under s 3.4.38(6) of the Act.