Weingart v Leanne Cain and Associates
[2018] VSC 242
•22 February 2018
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COSTS COURT
S CI 2017 00431
| DAN WEINGART | Applicant |
| v | |
| LEANNE CAIN & ASSOCIATES | Respondent |
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JUDGE: | Wood AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 February 2018 | |
DATE OF DECISIONS & REASONS: | 22 February 2018 | |
CASE MAY BE CITED AS: | Weingart v Leanne Cain & Associates | |
MEDIUM NEUTRAL CITATION: | [2018] VSC 242 | |
DECISION & REASONS
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Scope of costs agreement – non-compliance with disclosure obligations under Legal Profession Act 2004 – costs of the proceedings
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Ms S Cherry | Debra Paver |
| For the Respondent | Mr M La Pirow | Leanne Cain & Associates |
HIS HONOUR:
On 9 February 2017 the applicant filed a Summons for Review of Costs pursuant to s 3.4.38(1) of the Legal Profession Act 2004 (‘Act’). Filed with the Summons were bills of costs totalling $138,660.38.
The costs were incurred when the respondent acted for the applicant. On 29 March 2017 the respondent filed an ‘Enumerated and Notated Bill’ which claimed $117,662.35. The taxation in this matter finally concluded on 12 February 2018. It was hard fought and at times acrimonious.
Several outstanding issues remained to be determined once the taxation of the applicant’s liability to the respondent was finalised. These issues were addressed in written submissions filed by the parties in December 2017 and supplemented with oral argument on 12 February 2018. I reserved my decision at that time and now publish my decision and reasons.
By way of background the respondent commenced acting for the applicant in October 2013. The relevant documentation generated at that time included a letter dated 10 October 2013 headed ‘Family Law Costs’. The letter included a list under the words ‘What we will do for you includes:’ The list included ‘Act for you in relation to your Family Law matter’, ‘Draw any necessary Family Court documents and lodge them in the Family Court of Australia or Federal Circuit Court’ and ‘Brief experienced Family Law Barristers’. The other relevant documents were a Costs Agreement and Disclosure document, both headed ‘Family Law Matter’.
At the commencement of the retainer the applicant and his wife had shared parenting arrangements in relation to their children. The area of conflict at that point was confined to property and financial matters. The objective meaning, and interpretation of the contractual documents and surrounding circumstances were that the retainer was in relation to federal family law matters.
The respondent unsuccessfully argued that all work was covered by the Costs Agreement. However in June 2014 the applicant’s wife initiated a proceeding at the Moorabbin Justice Centre to obtain a family violence intervention order (‘FVIO’). This was prior to initiation of any family law proceedings. The FVIO proceeding had no nexus with property or financial matters and it was on foot until August 2014. The respondent acted for the applicant and criminal barristers with particular expertise in these matters were engaged.[1] The respondent also undertook work in relation to the altered arrangements for the children as a result of the applicant’s obligations to comply with orders made in the FVIO proceeding. In August 2014 that proceeding was finalised.
[1]Mr David Goddard and Mr Shane Gardner.
A number of determinations were made in the current proceeding on 1 September 2017. The most significant one was the finding that the Costs Agreement did not cover the work undertaken between June and August 2014 as a result of the order made in the FVIO proceeding. The hearing in the current proceeding then occupied 21, 22, 25, 29 September and 27 October 2017.
Items claimed in the bill which represented work in relation to the FVIO proceeding, and the additional work undertaken in relation to the arrangements concerning the children in order to comply with the orders in the FVIO proceeding, were included in the bill and drawn on the basis of charges contained in the Costs Agreement. They had to be identified and quarantined from the bill over the course of the taxation as a result of the ruling made in relation to the scope of the Costs Agreement. Those items were initially calculated at $18,190.74.
A figure of $8,647.15 was also identified which represented the taxed off items in that part of the bill that represented true family law work calculated on the basis of the Costs Agreement.
On resumption on 12 February 2018 both parties advised they now had slightly different figures, but they sensibly agreed to these original calculations being utilised on the basis that the time that would have been required to trace the reason for the difference could not be justified having regard to the sums involved.
The respondent unsuccessfully argued that the additional work referred to in paragraph 6 above in relation to compliance with the FVIO had no nexus with the FVIO proceeding. The order in the FVIO proceeding (dated 22 May 2014) recited the names of the two children as ‘affected persons’ and the order restricted the applicant from being within 200 metres of home, school or childcare. The additional work by the respondent performed contemporaneously with the order had sufficient nexus with the FVIO proceeding. The alteration of the arrangements were undertaken because of the order in the FVIO proceeding.
The respondent unsuccessfully argued that there was no appropriate scale[2] and that the Costs Agreement should be applied on a ‘fair and reasonable’ basis.[3] On 27 October 2017 two further hearing dates of 9 and 10 November 2017 were vacated when the ruling was made that the respondent was entitled to recover the costs of that work on the Magistrates’ Court scale ‘G’ and that a bill drawn on that scale should be filed in this proceeding. This required a fresh bill to be drawn for that work.
[2]The Act s 3.4.19(b).
[3]The Act s 3.4.19(c).
The respondent unsuccessfully argued that the rates in the Costs Agreement, or the Supreme Court scale (appropriately modified), should be applied - the latter often being utilised in criminal matters. While a breach of an order in a FVIO proceeding can constitute a criminal offence, the application to obtain such an order is civil in character as the burden of proof is the civil standard, and the relief is in the nature of an injunction. The granting of relief in such an application does not constitute an offence or result in a criminal record. A ruling was made that the top Magistrates’ Court scale was the appropriate one. Even if there was no appropriate scale for this work it would have been an appropriate basis to tax on a ‘fair and reasonable’ basis in any event.
The applicant unsuccessfully resisted the finalisation of this work in the current proceeding other than the work being merely ‘taxed off’. A bill drawn on the Magistrates’ Court scale was ordered however because that work was included in the gross sum invoices which the applicant seeks to review via the Summons filed to initiate the current proceedings. Although that work was not recoverable on the rates in the Costs Agreement, the respondent performed the work and is entitled to recover costs for it, albeit on a different basis. Therefore the taxation of that work on the Magistrates’ Court scale was required in order to complete the review of the work charged for in the bills sought to be reviewed in the current proceedings. The applicant was entitled to file a notice of objection to that bill and this was flagged in his written submissions filed 12 December 2017.[4] A formal notice of objection was not filed because an Offer of Compromise to accept $14,000 was made by the respondent and accepted by the applicant for these Magistrates’ Court scale costs.
[4][7]–[8].
On 27 October 2017 the applicant flagged a number of remaining issues to be ventilated. An order was made for brief written submissions to be filed and served by the applicant by 11 December 2017 with the respondent to reply by 22 December 2017.
An order was also made on 27 October 2017 for the respondent to file and serve an itemised bill on the Magistrates’ Court scale ‘G’ by 24 November 2017 representing the excised work in relation to the FVIO proceeding.
A significant issue that remained to be determined was the costs of the current proceedings. That issue is obviously clarified at the conclusion of the taxation part of the proceedings. Before s 3.4.45(2)(a) of the Act could be considered it was logical that the questions of whether costs were reduced by 15% or more, what the figure for the Magistrates’ Court work was, and whether that work had been ‘taxed off’ the initial bill drawn be determined first.
The respondent’s bill drawn on the Magistrates’ Court scale was filed on 23 November 2017. The sum of $23,378.83 was claimed with an additional sum representing GST of $2,337.88 making a total of $25,716.71. GST was already included in the scale so GST should not have been claimed on top of the figure calculated on scale. The respondent conceded this was an error on 12 February 2018. Prior to the resumed hearing scheduled for 12 February 2018 the respondent made an offer to accept $14,000 to resolve this bill and this offer was accepted by the applicant.
The final taxed or agreed figures will need to be calculated with the assistance of the parties in due course. However, the classification of the taxed off or excised sum of $18,190.74 from the bill (represented by the FVIO sum removed from the initial bill) is likely to be relevant as to whether costs had been reduced by 15% or more. The respondent filed a document entitled “Respondent’s Summary of Taxation” at the hearing on 12 February 2018. It contained two sets of figures calculated as ‘Bill as drawn’ and ‘Bill as asserted by Plaintiff’. They both factor in the $14,000 being added back in with the result that overall costs liability has been reduced by 9.59% or 10.19% depending on which set of figures are utilised.
The applicant obviously submits that the $18,190.74 should be taxed off in the hope that the result will be that the initial bill was reduced by more than 15% on taxation. Whether the excised FVIO sum is treated as ’taxed off’ therefore has a potentially critical impact on the costs of the proceedings and whether the legal costs have been reduced by 15% or more. Clearly the Magistrates’ Court scale bill has been reduced by more than 15% when the sum offered and accepted is factored against the sum claimed in that bill.
The applicant relies on the authority of In re Gibbs and Farrell[5] - a majority Full Court decision in the New South Wales Supreme Court for the proposition that items disallowed on taxation should be ‘taxed off’ irrespective of the reason. That is, whether it is on the basis there is no retainer, or it is not work of a solicitor or ‘for any other reason’[6] and this therefore had implications under the then ‘one sixth principle’ then in operation (now the ‘15% rule’). That case was dealing with NSW legislation in place at that time. The applicant did not address the Court in relation to the wording of the provision considered in that case but it is clear from the language in the judgment that the ‘one sixth principle’ was being considered in the context of a ‘bill of costs’.
[5](1941) 41 SR (NSW) 249.
[6]Ibid 255 (Jordan CJ).
One factor to be considered in relation to the question of costs of the proceeding is whether ‘on the review the legal costs are reduced by 15% or more’ as provided in s 3.4.45(2)(a) of the Act. There is a discretion to be exercised as the section states ’unless the Costs Court otherwise orders’.
Section 3.4.38(1) of the Act enables a client to review ‘the whole or any part of legal costs’. The phrase ‘Legal costs’ is defined as ‘amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services’.[7] It is not the reduction in a specific bill that necessarily determines this issue – it is the overall reduction in the legal costs sought to be reviewed. A focus on whether the FVIO work was ‘excised’ or ‘taxed off’ the original bill is not necessarily determinative of the issue. Here, the bills sought to be reviewed included the FVIO work. It was charged on an incorrect basis. That work has been separately identified, calculated on the correct basis and then compromised at $14,000. There is no reason that figure should not be factored in for the purpose of the exercising the discretion under s 3.4.45(2)(a) anyway.
[7]The Act s 1.2.1.
In effect the applicant argued that there was no bill on the correct basis and therefore those costs were not due and payable, the money should not have been taken from trust funds, and therefore they should not be considered in relation to the question of the costs of the proceeding. This ignores the fact that that work was in the bill sought to be taxed, and s 3.4.38(4) of the Act states that ‘if any costs have been paid without a bill, the client may nevertheless apply for a costs review’.
The applicant raised a number of instances of failure with disclosure compliance obligations under the Act. These are relevant to the question of costs of the current proceeding for the purposes of considering the impact of s 3.4.45(2)(b) of the Act.
The applicant’s written submission of 12 December 2017 covered four outstanding issues. The respondent filed written submissions on 22 December 2017 containing six headings in response. For convenience the four outstanding issues identified by the applicant will be utilised. Cognisance of the respondent’s six topics occurred as part of the consideration of the four topics.
The first issue was with the treatment of the FVIO costs and this contained two components. The first component of this issue was that the applicant seeks a refund of money received by the respondent ‘in purported payment’ of the FVIO costs on the basis there was no present entitlement, and that a trust account deficiency has occurred.
The second component of this first issue was the submission that the FVIO costs should be ‘taxed off’ on the basis the work was not properly charged so they are not due and payable and the respondent has accrued no rights under s 3.4.33. In relation to this second component that section of the Act deals with the respondent’s ability to issue proceedings for recovery. That is not the situation here - the applicant has commenced proceedings to review the legal costs that he is, or ‘may become liable to pay’ to the respondent for that work. That issue has been dealt with above at paragraphs 20 to 23.
In relation to the first component, on several occasions over the course of the part heard taxation dates outlined in paragraph 7 above the applicant sought an immediate refund of the money paid for that work and those applications were refused. The applicant relied on Batrouney v Forster[8] for the proposition that no bill has been given on the correct basis so therefore money paid into trust should not have been removed and therefore should have been refunded immediately. The respondent sought to distinguish Batrouney.[9] In particular in that case the solicitor could not establish that payment from the funds in trust was made with the client’s consent and knowledge. This was not the case here.
[8][2016] VSCA 80 [140], [248] (‘Batrouney’).
[9][2016] VSCA 80.
In Batrouney the solicitor knowingly drew a bill on a basis (time costing) which was not provided for in his own Costs Agreement (Supreme Court scale). Here the respondent rendered bills in accordance with the Costs Agreement that was in existence at the time and the bills were paid without dispute as to the basis of charging. The money was validly withdrawn at the time. It is only much later that the applicant has been successful in an argument that a modest part of the work fell outside the ambit of the Costs Agreement and those costs should be assessed on a different basis. Until the taxation of the FVIO work was completed it was not possible to ascertain what the differential may have been between recovery on the basis of the Costs Agreement and on the Magistrates’ Court scale. It was always a possibility that recovery by the respondent might have been higher on the Magistrates’ Court scale and an early refund would not have been appropriate in those circumstances. The fact that the bill on the Magistrates’ Court scale claimed $23,378.83 exclusive of GST when those costs were quantified at $18,190.74 on the basis of the Costs Agreement confirms that scenario was a possibility.
The second issue was the respondent’s alleged failure to comply with disclosure obligations. The written submission details these.[10] The applicant has also included a document headed ‘Table A’ which outlines the failures to provide future estimates in compliance with s 3.4.16 of the Act. It is not necessary to repeat them. The issue is whether the Court ought to exercise the discretion contained in s 3.4.17(4) having regard to the ‘seriousness’ of non-compliance. The respondent characterises any failure as not serious.[11] The applicant’s submission takes the opposite view.
[10][10]– [21].
[11][1]-[2], [32]– [41].
The third issue is tied up with the second issue. It is the effect of the involvement of the applicant’s father who is an experienced and accredited costs lawyer. The applicant’s submissions address this area.[12] I accept the applicant is not a ‘sophisticated client’ for the purposes of the Act and his father was not a third party payer. It is apparent from material produced over the course of the taxation (file notes and emails) that Mr Weingart Senior was intimately involved throughout. He was intimately involved in his adult son’s family law litigation with his wife and privy to conferences, correspondence, instructions, strategy and periodic payments of costs. The respondent relies on the heavy involvement of the applicant’s father to minimise the seriousness of any failure. I do not regard the involvement of his father as a relevant factor.
[12][22]– [26].
The applicant is an accountant and the absence of a request for further information could be interpreted to mean he was content to give instructions in relation to the conduct of the matter in spite of the absence of comprehensive updated disclosure of future costs. The applicant relies on the fact that periodic bills were rendered for sums higher than previous forward estimates as evidence of serious non-compliance. However, this is a two edged sword. The fact that bills in excess of previous forward estimates were paid without question can be taken as an indicator that the applicant was not concerned by the absence of accurate forward estimates. The Court was privy to file notes and correspondence between the applicant and respondent during the course of the taxation. This was a reasonable conclusion when considered with the instructions and strategies adopted in relation to his wife. Like this current proceeding the family law dispute was acrimonious and hard fought. I am satisfied that the absence of accurate disclosure has not affected the manner in which instructions were given. To put it another way, accurate disclosure would not have deflected the applicant from the courses of actions adopted vis a vis his wife. To that extent the failures are not particularly serious.
True it is there were errors in relation to minor matters like the review period available and the correct name for the applicable legislation but this has had no prejudicial effect on the applicant. In relation to the work involving the FVIO proceeding there was obviously no compliance at all with s 3.4.9 of the Act but this was as a result of the error made by the respondent in relation to whether this work was covered by the Costs Agreement and previous disclosure. Taking all failures into account a modest reduction of 5% in the overall costs is warranted.
The fourth issue is the costs of the proceedings. The applicant’s written submissions address this area.[13] The conduct of the proceedings is relevant to the exercise of the costs discretion. There are several things that count against the respondent. The first is the prima facie impact under the Act of non-disclosure.[14] Prior to taxation inspection of the respondent’s file was problematic and the documents made available were incomplete. Primary source documents, being LEAP records, were not made available for inspection when an order for inspection of the file was made. It was much later that the applicant was made aware of their existence. These records were only first produced at taxation and were particularly relevant. They often contained detailed descriptions of the work and time involved. They were often the only primary document in absence of hand written file notes on the paper file. The taxation took longer than it should have because of the lack of file notes and the fact that FVIO work (both stand alone and mixed) had to be identified in the running of the hearing.
[13][28]–[30].
[14]The Act s 3.4.45(2)(b).
Prima facie the respondent is liable for the cost of the proceedings irrespective of whether costs have or have not been reduced by 15% or not. This is so for two reasons. First, due to non- compliance with disclosure obligations and the impact of s 3.4.45(2)(b) of the Act (absent any effective argument, effective offer of compromise and favourable exercise of a discretion). Secondly, the matter ran longer than a matter of this magnitude would normally take. This is attributable mainly to the actions of the respondent due to the time and effort occupied by unsuccessful arguments in relation to the basis of quantification of the FVIO work, the necessary identification of FVIO work, the state of the file on inspection, and the state of the file in the running of the taxation.
The parties should now have an opportunity to consider these reasons before orders can be made finalising the matter.
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