Wentworth v Rogers

[2002] NSWSC 709

CITATION:	Wentworth v Rogers [2002] NSWSC 709
CURRENT JURISDICTION:	Common Law Division
FILE NUMBER(S):	SC 13494/01; 13492/01
HEARING DATE(S):	01/08/02
JUDGMENT DATE:	15 August 2002
PARTIES :	Katherine Wentworth - First Plaintiff Salvatore Russo - Second Plaintiff Gordon John Rogers - Defendant
JUDGMENT OF:	Barrett J

LOWER COURT JURISDICTION :	Costs assessment
LOWER COURT FILE NUMBER(S) :	91247/00; 91248/00
LOWER COURT JUDICIAL OFFICER :	Mr I F Dwyer

COUNSEL :	First Plaintiff in person Mr D P F Officer QC/Ms V Culkoff - Second Plaintiff Mr P J Beazley, Solicitor - Defendant
SOLICITORS:	First Plaintiff in person Russo & Partners - Second Plaintiff Beazley Singleton - Defendant
CATCHWORDS:	PROCEDURE - costs - assessment of costs by costs assessor - appeal against assessment - PROFESSIONS AND TRADES - legal practitioners - basis of retainer - "pro bono" - "no win/no pay" - right to be paid by client - estoppel - quantum meruit - APPEAL AND NEW TRIAL - nature of appeal by "new hearing" - alternative avenue of review by specialist panel - criteria for leave to appeal
LEGISLATION CITED:	Legal Profession Act 1987 Legal Profession Regulation 1994
CASES CITED:	ABB Power Generation Ltd v Chapple (2001) 25 WAR 158 Adam P Brown Male Fashion Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 Adamson v Williams [2001] QCA 38 Atlas v Kalyk [2001] NSWCA 10 Barendse v Comptroller General of Customs (1996) 136 FLR 243 Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd [1975] NSWLR 174 Busuttil v Holder (unreported, NSWSC, 6August 1996) Cachia v Hanes (1993) 179 CLR 403 Casaceli v Morgan Lewis Alter [2001] NSWSC 211 Chapmans Ltd v Yandell [1999] NSWCA 361 Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 Commonwealth Bank of Australia v Hattersley (2001) 51 NSWLR 333 Croker v Commissioner of Taxation [2001] NSWSC 188 Firth v Kasumovic [2001] NSWSC 341 Flett v Deniliquin Publishing Co Ltd [1964-65] NSWR 383 A Goninan & Co Ltd v Gill (2001) 51 NSWLR 441 Graham v Aluma-Lite Pty Ltd (unreported, NSWCA, 25 March 1997) Grynberg v Muller; Re Estate of Bilfeld [2002] NSWSC 530 Guss v Veenhuissen (No 2) (1976) 136 CLR 47 Harris v Caladine (1991) 172 CLR 84 Howard v Mechter [2000] NSWSC 455 Kioussis v M D Nikolaidis & Co [2001] NSWSC 353 McCullum v Ifield [1969] NSWR 328 NSW Breeding & Racing Stables Pty Ltd v Administrative Appeals Tribunal (2001) 53 NSWLR 559 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Phillips v Commonwealth (1964) 110 CLR 347 Phillips v Ellison Brothers Pty Ltd (1941) 65 CLR 221 Reynolds v Whittens [2002] NSWSC 155 Schokker v Commissioner of Taxation [2000] FCA 1734 Thurai Rajah v Villanueva [2001] NSWSC 597 Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281 Wentworth v Rogers [1999] NSWCA 403 Re Wilson [1978] VR 147
DECISION:	Leave to appeal against determinations of costs assessor refused

- 20 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BARRETT J

THURSDAY, 15 AUGUST 2002

13492/01 – WENTWORTH v ROGERS & ANOR
13494/01 – WENTWORTH & ANOR v ROGERS

JUDGMENT

Background

1 In each of these proceedings, relief is sought in relation to an assessment of costs carried out by a costs assessor under Division 6 of Part 11 of the Legal Profession Act 1987. The plaintiff in 13492/01 seeks relief in respect of the determination of costs evidenced by a certificate issued on 24 October 2001 by costs assessor Mr I F Dwyer (91247/00). The plaintiffs in 13494/01 seek relief in respect of the separate determination of the same assessor in his certificate issued on the same date (91248/00).

2 The costs in question were awarded by orders made by the court. In each case, there was an order that the present plaintiff (or plaintiffs) pay costs of the present defendant. Each of the proceedings now before me raises the same issues. I dealt with them together.

The plaintiffs’ principal contentions

3 The allegation central to the plaintiffs’ challenge to each assessment is that, before the relevant costs order was made in favour of the defendant, there existed an agreement between him and his lawyers that no costs would be charged. For that reason, the plaintiffs say, the correct assessment of costs was effectively zero.

4 Each of the challenged costs assessments referred to the terms of the agreement between the defendant and his lawyers, being a solicitor (Mr Licardy) and two barristers (Ms Lydiard and Ms Preston), although all three did not act throughout the whole period covered by the assessment. The assessor concluded that each of the three was retained on a “no win/no pay” basis, that is, generally speaking, on terms that, should the defendant be successful in the proceedings (as he eventually was, in each case), there would be remuneration but if he was unsuccessful the lawyer would not be remunerated.

5 The plaintiffs say that the assessor misconstrued the nature of the retainer and that it was, in reality, on a basis entailing the consequence that there was to be no remuneration of the lawyers in any circumstances, regardless of the result of the proceedings. That characterisation forms the basis for the contention that the assessor should have assessed costs at effectively zero.

6 The plaintiffs also say that there was no written record of the “no win/no pay” fee arrangement between the defendant and his lawyers before 10 February 1997, which was after the work in question had been done. That being so, they rely on s.184(4) of the Legal Profession Act for the proposition that the supposed “no win/no pay” agreement cannot be relied upon.

The relief sought

7 By the further further amended summons in each proceeding, there is sought, first, an order, in so far as it is necessary, that the plaintiff (or plaintiffs) be granted leave to appeal against part of the determination of the costs assessor; second, an order that, to the extent that each assessment proceeded on the basis that each lawyer was acting on a “no win/no pay” basis and not on a “pro bono” basis, it be set aside; and, third, a declaration that the defendant was represented on a “pro bono” basis and was not entitled to any costs for his representation.

8 In advancing these claims, the plaintiffs rely on ss.208L and 208M of the Act. Those sections are in the following terms:

“ 208L Appeal against decision of costs assessor as to matter of law
(1) A party to an application who is dissatisfied with a decision of a costs assessor as to a matter of law arising in the proceedings to determine the application may, in accordance with the rules of the Supreme Court, appeal to the Court against the decision.
(2) After deciding the question the subject of the appeal, the Supreme Court may, unless it affirms the costs assessor’s decision:
(a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or
(b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application.
(3) On a re-determination of an application, fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.
208M Appeal against decision of costs assessor by leave
(1) A party to an application relating to a bill of costs may, in accordance with the rules of the Supreme Court, seek leave of the Court to appeal to the Court against the determination of the application made by a costs assessor.
(2) A party to an application relating to costs payable as a result of an order made by a court or a tribunal may, in accordance with the rules of the court or tribunal, seek leave of the court or tribunal to appeal to the court or tribunal against the determination of the application made by a costs assessor.
(3) The Supreme Court or court or tribunal may, in accordance with its rules, grant leave to appeal and may hear and determine the appeal.
(4) An appeal is to be by way of a new hearing and fresh evidence, or evidence in addition to or in substitution for the evidence received at the original proceedings, may be given.
(5) After deciding the questions the subject of the appeal, the Supreme Court or court or tribunal may, unless it affirms the costs assessor’s decision, make such determination in relation to the application as, in its opinion, should have been made by the costs assessor.”

9 It is also pertinent to set out s.208NC:

“ 208NC Court may refer unreviewed determination to review panel
(1) If an appeal is made under section 208M against a determination of a costs assessor and the determination to which the appeal relates has not been reviewed by a panel in accordance with Subdivision 4A, the court or tribunal to which the appeal is made may refer the appeal to the Manager, Costs Assessment for a review by a panel under that Subdivision.
(2) For the purposes of Subdivision 4A, the referral of an appeal by a court or tribunal under subsection (1) to the Manager, Costs Assessment is taken to be a duly made application for a review under that Subdivision.”

10 Section 208NC needs to be read in the light of s.208KC which describes the review function assigned to a review panel consisting of two costs assessors:

“ 208KC General functions of panel in relation to review application
(1) A panel constituted under this Subdivision may review the determination of the costs assessor and may:
(a) affirm the costs assessor’s determination, or
(b) set aside the costs assessor’s determination and substitute such determination in relation to the costs assessment as, in their opinion, should have been made by the costs assessor who made the determination that is the subject of the review.
(2) For the purposes of subsection (1), the panel has, in relation to the application for review, all the functions of a costs assessor under this Part and is to determine the application, subject to this Subdivision and the regulations, in the manner that a costs assessor would be required to determine an application for costs assessment.
(3) However, the review is to be conducted on the evidence that was received by the costs assessor who made the determination that is the subject of the review and, unless the panel determines otherwise, the panel is not:
(a) to receive submissions from the parties to the assessment, or
(b) to receive any fresh evidence or evidence in addition to or in substitution for the evidence received by the costs assessor.
(4) If the costs assessors who constitute the panel are unable to agree on a determination in relation to an application, the panel is to affirm the determination of the costs assessor who made the determination that is the subject of the review.”

11 The plaintiffs say that two questions of law capable of being dealt with under s.208L are raised by the costs assessments, namely, whether agreements were void pursuant to s.184(4) of the Act and whether the costs assessor failed to comply with clause 26IJ of the Legal Profession Regulation 1994 (and, in particular, clause 26IJ(2)(d)(i) and (ii)) in that he failed to give adequate reasons for his decision. The question whether the lawyer’s retainers were “pro bono” or on a “no win/no fee” basis is said by the plaintiffs to be a mixed question of law and fact, as is an additional question to which they advert, namely, whether the lawyers are estopped from departing from representations allegedly made by them to the plaintiffs and the court that they were acting “pro bono”. Questions of law and questions of fact alike may be agitated upon a s.208M appeal. Determination of the questions said to be mixed questions of law and fact is accordingly seen by the plaintiffs as something which can be pursued only under s.208M with the leave of the court.

12 By consent, argument before me on 1 August was confined to the question whether leave to appeal should be granted under s.208M.

13 The propositions upon which the plaintiffs rely call for an examination of several parts of the Legal Profession Act concerning the charging and assessment of legal costs.

Costs agreements and fee disclosure

14 Division 3 of Part 11 of the Act deals with “costs agreements”. Section 184(4), upon which the plaintiffs rely, is located in Division 3. That section declares that a “costs agreement” is void if it is not in writing or evidenced in writing. The expression “costs agreement” is defined by s.173(1) as meaning “an agreement referred to in section 184 as to costs for the provision of legal services”, that is, according to another definition in the same section, “work done, or business transacted, in the capacity of a barrister or solicitor”.

15 Two kinds of agreement are “referred to in section 184”. For present purposes, I am concerned only with the kind referred to in s.184(1)(a):

“An agreement as to the costs of the provision of legal services may be made with a client by:
(a) the barrister or solicitor who is retained by the client to provide the services …”

16 Section 184(1)(a) thus contemplates that an agreement “may be made” by a barrister or solicitor with his or her client “as to” the costs of the provision of legal services. Lawyer and client are not compelled to enter into such an agreement. The choice is theirs. If they decide to make an agreement, they will achieve their intended objective only if they cause that agreement to be in writing or to be evidenced in writing. If they fail to take that step, they have, in reality, not entered into any agreement at all since their purported agreement is rendered void by s.184(4):

“A costs agreement is void if it is not in writing or evidenced in writing.”

17 A “costs agreement”, as defined, is not the same as a contract for the provision of legal services. This is evident not only from the description and definition of “costs agreement” in ss.173(1), 184(1) and 184(3) but also from s.184(5):

“A costs agreement may form part of a contract for the provision of legal services.”

18 A contract for the provision of legal services may thus exist independently of a costs agreement. It follows that there can be a contractual obligation on the part of a lawyer to provide legal services and a contractual right on the part of a client to the rendering of such services even if there are no express terms as to costs. Putting this in perhaps more familiar terminology, there can be a retainer despite there being no agreement of the kind the Act designates a “costs agreement”.

19 The purpose behind s.184(4) is clear enough. If there is to be reliance on the terms of a contract as to the quantum or manner of computation of, or other matters “as to”, a lawyer’s costs, that contract must either be a written contract or a contract evidenced in writing. This ensures that the terms are set down in tangible form so that any doubt about the way in which they are expressed is avoided. If, because of the lack of writing, there is room for speculation or argument about what was agreed as to costs, then the legislative policy is that any agreement should be treated as non-existent and rights and obligations on the subject of the lawyer’s remuneration should be determined without regard to the supposed agreement.

20 A particular kind of costs agreement contemplated by the Act is one under which the payment of all the lawyer’s costs is contingent on the successful outcome of the matter in which the lawyer provides the legal services – a concept summed up, in general terms, in the “no win/no pay” label. This kind of agreement (a “conditional costs agreement”) is provided for in s.186. Section 187 allows a conditional costs agreement to provide for a premium on the costs provided for in the case of successful outcome. Section 188 refers to certain provisions which may not be included in a costs agreement, namely, provisions that costs are to be determined as a proportion of, or are to vary according to, the amount recovered in any proceedings to which the agreement relates.

21 Other provisions to which reference should be made are those in Division 2 of Part 11 (ss.175 to 183) which place upon a lawyer an obligation to disclose to a client certain matters with respect to costs at a time and in a way specified in the provisions. The consequence of failure by a lawyer to comply with the disclosure requirements is that the lawyer has no right to recover costs (and the client has no obligation to pay them) unless the costs have been assessed under Division 6 of Part 11. This is the effect of s.182.

Assessment of lawyer-client costs

22 I turn now to Division 6 of Part 11, noting immediately that, while it is concerned with the general subject of “assessment” of costs, it approaches that general subject from two quite different perspectives. The first involves costs claimed by a lawyer from his or her client. The second is concerned with costs which a court or tribunal has awarded to one party to proceedings as against another. (I leave to one side the case where one practitioner retains another to act on behalf of the first’s client.)

23 The provisions in Divisions 2 and 3 concerned with fee disclosure and costs agreements respectively are most directly relevant to the first of these matters. So far as Division 2 is concerned, there is the express provision that, in the absence of compliance with the disclosure requirements, Division 6 assessment is the only way in which a right to recover costs can arise in the lawyer: s.182. The Division 6 process, in so far as it is concerned with costs to be paid by a client to a lawyer, works on the basis that the lawyer will deliver to the client a “bill of costs”, defined by s.173 as meaning “a bill of costs for providing legal services” and as including “a memorandum of fees”. A client to whom a bill of costs is given may apply to have the whole or any part of the costs assessed, as may the lawyer who gave the bill. The assessment process occurs under Subdivision 2 of Division 6. A costs assessor may confirm the bill of costs or, if satisfied that the disputed costs are unfair or unreasonable, substitute what he or she considers to be a reasonable amount.

The role of costs agreements in assessment of lawyer-client costs

24 The relevance of costs agreements to the assessment process in relation to lawyer-client costs under Subdivision 2 of Division 6 emerges from ss.208C and 208D. Those sections lay down rules to be observed by assessors in cases where there is a costs agreement complying with Division 3. The first of these rules compels an assessor to decline to assess a bill of costs where the agreement specifies the amount of the costs or the dispute relates only to the rate specified in the agreement for calculating costs. In those cases, the agreed amount or rate prevails and there is no assessment. The second rule applies where the agreement specifies a rate at which the costs are to be calculated but the dispute relates to some other matter. In a case of that kind, the costs are to be assessed at the agreed rate. The third rule is that the costs assessor must give effect to a provision of the agreement for the payment of a premium unless the premium is determined to be unjust under s.208D. The fourth rule comes from s.208D itself: the assessor may determine that any term of the costs agreement is unjust.

25 These provisions with respect to the part played by a costs agreement in the process of costs assessment as between lawyer and client emphasise the essential nature of such an agreement. While it may have contractual force between its parties, its effect may be varied or overridden by the assessment process. Specifically, content of certain kinds will cause an attempt to resort to assessment to be unsuccessful; content of another kind will be treated as conclusive when an assessment is undertaken; and any term may be determined to be unjust. Of course, if a costs agreement is made void by s.184(4), it will not produce any of these consequences, since an agreement which is void must be regarded as non-existent so far as the efficacy of any of its terms is concerned.

26 The important point here is that where assessment of lawyer-client costs occurs under Division 6, it is the result of the assessment, not the costs agreement, that defines the rights and obligations of the parties; and that any costs agreement plays no more than the role I have described.

The lawyer’s right to remuneration

27 In saying this, I do not suggest that lawyer and client cannot enter into a binding contract concerning the provision of legal services or that such a contract cannot contain terms fixing the lawyer’s remuneration and giving a contractual right to recover it. Clearly, they can and, as s.184(5) recognises, the terms of any such contract as to remuneration will themselves be a costs agreement. The real point is that terms as to remuneration are susceptible to being overtaken by the costs assessment process in such a way that, in the final result, the remuneration actually applying differs from that agreed.

28 Where there is no “costs agreement” or any such agreement is void (because not in writing or evidenced in writing), it does not follow that the lawyer has no right to remuneration and the client has no obligation to pay for legal services provided. Where a lawyer does work and the client has the benefit of it, an entitlement to remuneration generally arises. But the lawyer is precluded from taking proceedings for recovery until after a bill of costs complying with the statutory requirements has been delivered to the client: s.192. It is the delivery of the bill of costs that secures to the client or the lawyer (or both) access to the costs assessment process. If there is no assessment, the lawyer will recover according to ordinary contractual principles, subject always to the effect of s.184(4) in making void any terms constituting a “costs agreement”, in which event there is no apparent reason why there should not be recovery upon a quantum meruit.

29 It is important to emphasise that the only effect of s.184(4) is to obliterate an agreement, which is unwritten, and not evidenced in writing. Because the law regards it as non-existent, the agreement itself cannot be the source of rights and obligations. But nothing in the Act prohibits, expressly or by implication, the making of unwritten costs agreements. Nor does the Act prohibit, expressly or by implication, the recovery of remuneration in the absence of a written agreement – the most it does is to say that if the fee disclosure requirements have not been observed (a quite distinct matter), the right to recover remuneration is dependent upon costs first having been assessed under Division 6 of Part 11. No illegality flows from an unwritten costs agreement or from the provision of legal services in the context of such an unwritten agreement or without any costs agreement at all; it is just that remuneration cannot be claimed under an unwritten agreement because the agreement the parties attempted to make never eventuated, being void from the moment of its supposed inception. The situation is thus one in which services are lawfully provided and lawfully received but in the absence of any contract for payment.

30 In such a case, principles of restitution countering unjust enrichment allow recovery of reasonable remuneration. The relevant principles were authoritatively established by the judgments in v Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. The right of recovery proceeds from the requirements of justice as distinct from any implied contract, there being, in the present context, no room left by s.184(4) for the existence of an implied contract or implied term for the payment of remuneration. The matter was put thus by Murray J (with whom Templeman J and Einfeld AJ agreed) in ABB Power Generation Ltd v Chapple (2001) 25 WAR 158:

“[T]he basic concept provides a capacity for the law, by drawing on principles of the common law and equity to provide compensation to a plaintiff in a case where, at the plaintiff’s expense in a material sense, the defendant has been provided with and has accepted a benefit of a material kind which, in the circumstances of the case, it would be unjust to permit the defendant to receive without making reasonable recompense to the plaintiff for it. A variety of factual situations will give rise to the obligation but, in my opinion, a classic example of the application of these principles arises in circumstances where the benefit has been provided and taken outside the ambit of a contractual relationship but nonetheless in a commercial context where the plaintiff can be seen to be more than a mere volunteer.”

31 In separate observations, Templeman J said:

“[I]f the defendant, as a reasonable person, did not appreciate that the plaintiff would look to him for payment, it would probably be difficult to make out a case of unjust enrichment. That is why Byrne J in Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 said that ‘the appropriate enquiry” was whether the recipient of the relevant services should have realised that he would be expected to pay for them.”

32 The aptness of general restitutionary principles to ground a claim for lawyers’ costs was recognised by the Queensland Court of Appeal (McMurdo P, Thomas JA and Mullins J) in Adamson v Williams [2001] QCA 38:

“In the present case the claim was ‘$9,437.82 for solicitor’s costs and outlays’. The full statement in the pleading was ‘The plaintiff claims $9,437.82 for solicitor’s costs and outlays incurred in this jurisdiction from June 1996 to July 1887. An account in taxable form was delivered to the defendant on 25 July 1997.’ That would permit a judgment under any cause of action that was established by the facts.
Although the natural inference in such a claim is that based on contract, there is nothing inconsistent in that pleading with the maintenance of a claim based on either contract or quasi-contract. Quasi-contractual claims, including those conveniently described as quantum meruit are now generally classified as restitutionary claims: Pavey & Matthews Pty Ltd v Paul [(1987) 162 CLR 221]; ANZ Banking Group Ltd v Westpac Banking Corporation [(1988) 164 CLR 662, 673]; David Securities Pty Ltd v Commonwealth Bank of Australia [(1992) 175 CLR 353]; Baltic Shipping Co v Dillon [(1993) 176 CLR 344]; Mason and Carter Restitution Law in Australia [At p 11]. Of course a claim cannot be made for restitution when an existing enforceable contract governs the claim in question: Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd [(1990) 20 NSWLR 251, 275]. But a claim for quantum meruit may arise if a party, through breach or wrongful repudiation, prevents the other party from earning the stipulated remuneration: McIntosh Hamson Hoare Govett Ltd v Pinnacle Properties Ltd [Appeal No 166 of 1994, 5 May 1995, 7].”

33 The availability of quantum meruit as a means of recovery where the contract the parties sought to make is void has long been recognised. It is sufficient to refer to an observation of Starke J in Phillips v Ellison Brothers Pty Ltd (1941) 65 CLR 221, supported by a reference to Craven-Ellis v Canons Ltd [1936] 2 KB 403:

“So also it has been held that a person who rendered services under an agreement which was in fact void was entitled to recover for the services rendered upon the basis of a quantum meruit .”

(See also Flett v Deniliquin Publishing Co Ltd [1964-5] NSWR 383.)

34 Where there is no operative contract (whether or not because of s.184(4)), lawyers’ remuneration may be recovered on ordinary principles of restitution, apart altogether from the provisions of the Legal Profession Act. The Act does, however, have the effect that, if there has been an assessment of costs under Subdivision 2 of Division 6, it will be that assessment which sets the quantum of recoverable remuneration; and that if the written disclosure requirements of Division 2 have not been observed, such assessment will be a pre-condition to any recovery.

Costs orders – the indemnity principle

35 It is appropriate to look next at the provisions in Division 6 dealing with the quite separate and distinct subject of costs awarded by courts. That examination needs to be undertaken against the background of the general principle that costs awarded by order of a court are intended to indemnify (commonly only partially) a successful party who has incurred a liability for costs in relation to the proceedings. The existence of a liability of the client to pay costs lies at the centre of this concept, but it is clear that costs may in certain special and limited circumstances be recovered under an order for costs even where there is no right of recovery by the lawyer against his or her client. A common case is where the lawyer is an employee and represents his employer’s interests in court without right to or expectation of reward apart from the salary which is payable regardless of the nature or quantity of legal work undertaken: see the comprehensive treatment of this subject in the judgment of Davies AJ in Commonwealth Bank of Australia v Hattersley (2001) 51 NSWLR 333. Another instance is where a lawyer resorts to self-help by performing legal work in proceedings in which he or she is a party. In Atlas v Kalyk [2001] NSWCA 10, the Court of Appeal held that the decision of the High Court in Cachia v Hanes (1993) 179 CLR 403 as to self-represented litigants generally did not disturb that court’s earlier recognition of the lawyer self-help exception in Guss v Veenhuissen (No 2) (1976) 136 CLR 47.

36 Apart from special circumstances and exceptions of this kind, absence of the lawyer’s right to recover remuneration from his or her client will mean that a costs order in favour of the client will be unproductive. The matter is dealt with succinctly in the following passage in the judgment of Hamilton J in Grynberg v Muller; Re Estate of Bilfeld [2002] NSWSC 350:

“In Ohn v Walton (1995) 36 NSWLR 77 at 79 Gleeson CJ (when Chief Justice of this Court) said that: ‘the purpose of an order for costs is to indemnify or compensate the person in whose favour it is made, not to punish the person against whom it is made’. In Latoudis v Casey (1990) 170 CLR 534 a similar statement had been made by Mason CJ at 543 and also by other Justices (Toohey J at 562-563; McHugh J at 566-567). And see Cachia v Hanes (1994) 179 CLR 403 at 414. It flows from this principle that for a costs order to be made there must be some liability, satisfied or unsatisfied, to indemnify or compensate for. There was a graphic illustration of this principle in Gundry v Sainsbury [1910] 1 KB 645. There a plaintiff recovered damages in a County Court before a jury, but said in cross-examination that he had an agreement with his solicitor that he should not pay any costs. The County Court Judge held that the plaintiff could not recover costs and the Court of Appeal upheld this decision. In TNT Bulkships Ltd v Hopkins (1989) 98 FLR 352 a successful party’s solicitors were unable to recover costs from the party relating to proceedings in the Supreme Court of the Northern Territory because not the holder of a current practising certificate. The successful party was held unable to recover costs from the unsuccessful party. And see per Griffiths CJ in Irving v Gagliardi (ex parte Gagliardi) No 2 (1895) 6 QLJ 200 at 200. The mere existence of an indemnity does not, of course, preclude the making of an order for costs: Johnson v Santa Teresa Housing Association (1992) 83 NTR 14.”

37 Another useful statement of the principle is found in the judgment of Master Malpass in Howard v Mechtler [2000] NSWSC 455:

“Under an order for costs, the paying party is only obliged to pay such costs as the receiving party was primarily and potentially legally obliged to pay to his solicitor. There is an indemnity only in respect of the costs covered by the order. A receiving party cannot receive a sum in excess of the liability to his own solicitor. There can be co-existing obligations. The liability of the client is not excluded merely because there may be a third person to indemnify the client. It is necessary to prove that under no circumstances does the client have any liability to pay costs to his solicitors.”

38 Reference may also be made to McCullum v Ifield [1969] 2 NSWR 328.

Absence of the lawyer’s right to recover remuneration

39 The right of a lawyer to be paid may, of course, be excluded by an express term of the contract between the lawyer and the client. But a contract between them positively excluding the lawyer’s right to remuneration will of its very nature be an agreement “as to the costs of the provision of the legal services”, in the same way as an agreement which provides for costs to be charged on some basis. This is because of the breadth of the words “as to”, being the words used in the description of “costs agreement”. In that connection I adopt the following observation of Menhennit J in Re Wilson [1978] VR 147:

“In my opinion, the expression ‘as to’ in s.104N has the meaning ‘with respect to’. In the Oxford English Dictionary it is stated that the expression ‘as to’, along with a number of other expressions, ‘have all the sense of ‘as regards, so far as it concerns, with respect or reference to’.’ It has been said that the power to make laws ‘with respect to’ a subject matter are the most comprehensive and widest words in which power can be given ( Cook v Buckle (1917) 23 CLR 311 at p 320; Bank of New South Wales & Ors v Commonwealth & Ors (1948) 76 CLR 1 at p 186 and Croft v Rose [1956] VLR 684 at p 687.”

40 A contract positively excluding all rights to remuneration (or the part of the contract which effects the exclusion) will therefore be a “costs agreement” as defined by s.173(1), with the result that it will be void by operation of s.184(4) if it is not in writing or evidenced in writing.

41 The lawyer’s right to be paid may also be lost – or, at least, become incapable of being asserted – by estoppel. This is a possibility to which the plaintiffs point in the present case. Such an estoppel would operate against the lawyer if he or she had, by words or conduct (including the making of an agreement rendered void by s.184(4)), induced the client to assume or expect that no fee would be charged in any circumstances and the client, relying on that, had gone ahead with the retainer which would otherwise have been fee-paying: see generally, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

42 A third possibility arises in the case where, in the absence of a written costs agreement, the lawyer must resort to a quantum meruit as a basis for the right to be paid. As Murray J pointed out in ABB Power Generation Ltd v Chapple (above), such a claim will not succeed where the provider of the services for which remuneration is sought “can be seen to be no more than a mere volunteer”. Templeman J regarded the relevant factor as whether the recipient of the services “should have realised he would be expected to pay for them”.

43 The second and third of these possibilities can be regarded as different aspects of the same underlying equitable principle based on unconscionability. Apart from the need for writing to support an effective contract to forego remuneration, all three possible bases for the unavailability of a right on the lawyer’s part to be paid for services rendered will raise similar factual issues.

Assessment of costs awarded by courts

44 Where a court orders that one party pay the costs of another and does not itself quantify the amount to be paid, either the court or one of the parties concerned may initiate the process of assessment of those costs under Subdivision 3 of Division 6. This is the effect of ss. 202(1) and (2):

“ 202 Application for assessment of party/party costs
(1) A person who has paid or is liable to pay, or who is entitled to receive or who has received, costs as a result of an order for the payment of an unspecified amount of costs made by a court or a tribunal may apply to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs.
(2) A court or tribunal may direct the Manager, Costs Assessment to refer for assessment costs payable as a result of an order made by the court or tribunal. Any such direction is taken to be an application for assessment duly made under this Division.”

45 Once the matter reaches a costs assessor, that assessor must proceed in accordance with the provisions of Subdivision 3 (ss.208F to 208I) which I set out in full:

“ 208F Assessment of costs ordered by court or tribunal
(1) When dealing with an application relating to costs payable as a result of an order made by a court or a tribunal, the costs assessor must consider:
(a) whether or not it was reasonable to carry out the work to which the costs relate; and
(b) what is a fair and reasonable amount of costs for the work concerned.
(1A) An assessment must be made in accordance with the operation of the rules of the relevant court or tribunal that made the order for costs.
(2) A costs assessor is to determine the costs payable as a result of the order by assessing the amount of the costs that, in his or her opinion, is a fair and reasonable amount.
(3) If a court or a tribunal has ordered that costs are to be assessed on an indemnity basis, the costs assessor must assess the costs on that basis, having regard to any relevant rules of the court or tribunal.
(4) The costs assessed are to include the costs of the assessment (including the costs of the parties to the assessment, and the costs assessor). The costs assessor may determine by whom and to what extent the costs of the assessment are to be paid.
(5) The costs of the costs assessor are to be paid to the Manager, Costs Assessment. Note. Section 208JA provides for the recovery of the costs of a costs assessor.

208G Additional matters to be considered by costs assessors in assessing costs ordered by court or tribunal

In assessing what is a fair and reasonable amount of costs, a costs assessor may have regard to any or all of the following matters:
(a) the skill, labour and responsibility displayed on the part of the barrister or solicitor responsible for the matter,
(b) the complexity, novelty or difficulty of the matter,
(c) the quality of the work done and whether the level of expertise was appropriate to the nature of the work done,
(d) the place where and circumstances in which the legal services were provided,
(e) the time within which the work was required to be done,
(f) the outcome of the matter.
208H Effect of costs agreements in assessments of party/party costs
(1) A costs assessor may obtain a copy of, and may have regard to, a costs agreement.
(2) However, a costs assessor must not apply the terms of a costs agreement for the purposes of determining appropriate fair and reasonable costs when assessing costs payable as a result of an order by a court or tribunal.
208I Court or tribunal may specify amount etc
This Division does not limit any power of a court or a tribunal to determine in any particular case the amount of costs payable or that the amount of the costs is to be determined on an indemnity basis.”

46 The central task of the assessor is thus to determine “the amount of the costs that, in his or her opinion, is a fair and reasonable amount”: s.208F(2). In performing that task, the assessor must proceed in accordance with such of the directions in Subdivision 3 as are expressed to be compulsory, eg, “must consider”, “must be made”, “must assess” and “must not apply”. The assessor is empowered to take into account certain matters expressly mentioned (“may have regard to”). The assessment process is directed towards the formation by the assessor of an opinion as to what is “fair and reasonable” in the whole of the circumstances of the case, with certain factors singled out for compulsory attention and others identified as factors to which attention may be given. The legislation does not evidence any intention that regard may not be had to matters not expressly identified in Subdivision 3. The “fair and reasonable” criterion is, to my mind, unconstrained except by reference to the “must” and “must not” aspects of Subdivision 3.

The role of costs agreements in the assessment of court awarded costs

47 Particularly pertinent in the present context are the provisions in s.208H about a costs agreement. In carrying out a Subdivision 3 assessment, an assessor “may” (not “must”) obtain a copy of, and have regard to, a costs agreement. The only possibly relevant costs agreement is one between the party in whose favour costs are awarded and that party’s lawyers. The assessor is, however, limited in what he or she may do with the information obtained from such a costs agreement. That information must not be used for the purpose of determining the appropriate fair and reasonable costs to be awarded. It follows that the content of the costs agreement must be disregarded entirely in the assessor’s evaluation of what is fair and reasonable.

48 The content of the costs agreement may, however, be used for other purposes relevant to the assessment. It will thus be available for consideration by the assessor if, as here, it is asserted that there is a term positively excluding the charging of costs by the lawyer, so that there is no liability for costs by reference to which a costs order can effectively operate. Use of the costs agreement for that purpose goes to the question whether costs should be assessed at all, rather than the question of the amount that is fair and reasonable.

Factors relevant to grant of leave to appeal

49 Against the background of this statutory scheme and, in particular, the significance within it of any agreement of lawyer and client as to the costs of the provision of legal services, I turn to the nature of the court’s function in determining an application for leave to appeal under s.208M.

50 The Act makes no attempt to define the circumstances in which, or factors by reference to which, the court should grant or withhold such leave. The plaintiffs referred to the test accepted by the parties in Reynolds v Whittens [2002] NSWSC 155, namely, that there is an obvious error on the face of the record and that there will be substantial injustice to the plaintiffs if the determination of the costs assessor is allowed to stand. This test was enunciated by Master Greenwood in Busuttil v Holder (unreported, NSWSC, 6 August 1996), where reference was made to the High Court’s statement in Adam P Brown Male Fashion Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 that it is “unnecessary and unwise to lay down rigid and exhaustive criteria” for the grant of leave to appeal.

51 A somewhat wider statement of the relevant considerations is to be found in the judgment of Fitzgerald JA (with whom Mason P and Davies AJA agreed) in Chapmans Ltd v Yandell [1999] NSWCA 361:

“Given the nature of the appeal under s.208M of the Act, I am satisfied that a master to whom an application for leave to appeal is made under that section should consider any material evidence which bears upon whether or not leave to appeal should be granted, including evidence which bears upon the likely outcome of the appeal if leave is granted: see Public Service Association of South Australia v Federation Clerks’ Union of Australia, South Australian Branch . (1991) 173 CLR 132.
On the other hand, it is important to keep in mind the purpose of a requirement of leave to appeal. It is intended to act as a filter to ensure that unsuitable appellate proceedings which are not able to be brought with the demands which that places upon the resources of the Court and the burden which it places upon other parties and the delays which it causes to other litigants. See for example Coulter v Regina (1988) 166 CLR 350 at 359.
It is also in my opinion important to keep in mind that s.208M must be considered in the context of s.208L, which restricts an appeal as of right to matters of law. In considering whether or not leave to appeal is granted, it must be decided whether or not, there not being a matter of law arising in the proceeding and there being an appeal as of right only as to a matter of law, there is some other matter which in justice requires that leave to appeal be granted to allow that matter to be relitigated. The party seeking leave to appeal obviously bears the burden of establishing that justice does require that leave to appeal be granted. Further, the master when considering whether to grant leave to appeal obviously has a very wide discretion: see CDJ v VAJ . [1998] HCA 67 per McHugh, Gummow and Callinan, JJ.”

52 The importance attached to the need to consider s.208M in the whole of the context in which it appears acquired an important new dimension when s.208NC came into operation on 18 January 2002. That section changed the statutory landscape in a significant way and it is now necessary to approach the leave question by reference to that changed landscape. In particular, it is necessary, upon any application for leave, to consider whether it may be appropriate for the matter to be dealt with by reference to the appeal procedure created by s.208M itself or by means of the alternative review process made accessible by s.208NC, assuming always that some need for reconsideration of the costs assessor’s determination has been shown.

53 The choice between the two possible avenues of review will be made, in any particular case, by examining the features of each and deciding which will more expeditiously and efficiently resolve the matters which need to be determined upon review. A preliminary, of course, will be a finding that there is a need for the costs assessor’s determination to be revisited in any event – or, in other words, that leave to appeal should be granted.

Features of the s.208M review process

54 The process of review provided for in s.208M itself is defined principally by ss.208M(4) and (5). The effect of those provisions was described by Heydon JA (with whom Sheller and Giles JJA agreed) in A Goninan & Co Ltd v Gill (2001) 51 NSWLR 441 as follows:

“The worker submitted that s208M(5) did not mandate the Compensation Court sitting as an appellate court to make such determination as the costs assessor should have made: it pointed to the word ‘may’. In my opinion that submission is incorrect: in context ‘may’ means ‘shall’. If ‘may’ did not mean ‘shall’, s208M(5) would contemplate the possibility of the Compensation Court sitting on appeal from the costs assessor, if it decided not to affirm the costs assessor’s decision, deciding either to make the determination which should have been made by the costs assessor or to make a determination which was different from that which should have been made by the costs assessor. It is difficult to imagine what that latter different determination could be. Can the possibility of a putatively different determination be based on the fact that the evidence before the Compensation Court or other appellate court may, by reason of s208M(4), be different from that which was before the costs assessor? A negative answer to that question is suggested by a comparison of s208M with s208L. Section 208L is a provision which provides a path to appellate review different from that which s208M(2) provides. Section 208M(2) permits the seeking of leave to appeal against the costs assessor’s determination from the court or tribunal which made the order for payment of the costs which were assessed. That application can be based on any error, whether of law or fact. Section 208L(1) provides that a party to an application who is dissatisfied with the costs assessor’s decision may appeal to the Supreme Court, without leave, but only on a matter of law. Section 208L(3) corresponds with s208M(4) in relation to fresh, additional or substituted evidence. Section 208L(2), however, in contrast to s.208M(5), provides:
‘(2) After deciding the question the subject of the appeal, the Supreme Court may, unless it affirms the costs assessor’s decision:
(a) make such determination in relation to the application as, in its opinion, should have been made by the costs assessor, or
(b) remit its decision on the question to the costs assessor and order the costs assessor to re-determine the application.’
The juxtaposition of par (a) and par (b) shows that the liberty to choose to make a determination which should have been made by the costs assessor is only a liberty to choose between that course and remission to the costs assessor. The word ‘may’ in s208L(2) confers no general discretion, but rather creates a duty either to make the determination which the costs assessor should have made or to remit the matter to the costs assessor. Accordingly the word ‘may’ in s208M(5) creates only a duty on the appellate court or tribunal to make whatever determination should have been made by the costs assessor.”

55 It was suggested in the course of the hearing before me that an appeal under s.208M might be restricted to certain matters – specifically, in the present case, the true nature of the retainer of the defendant’s lawyers and the terms of the agreement as to costs. As I read s.208M and the observations of the Court of Appeal in A Goninan v Gill, such a course is not open. In the first place, any party may elect, as of right, to adduce fresh evidence or evidence in addition to or in substitution for that which was before the costs assessor. As a result, the matter may fall to be determined by reference not only to different facts but also facts that are different in a way, which affects some part of the original decision beyond that to which the appeal is supposedly confined. Second and as Heydon JA observed in A Goninan v Gill, the court’s function is that of redetermining the matter as if it were the costs assessor and arriving at whatever determination it considers should have been made by him or her. This is a function that goes beyond merely determining discrete points specially earmarked for decision.

56 The references in s.208M to “a new hearing” and the receipt of fresh evidence and evidence in addition to or in substitution for the evidence before the assessor must be given full effect. They make it clear that s.208M(4) involves the kind of hearing de novo of which Glass JA said in Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281:

“All the issues must be retried. The party succeeding below enjoys no advantage, and must, if he can, win the case a second time.” [emphasis added]

57 It is of the essence of a new hearing or hearing de novo that the appeal court “pronounce anew upon the rights of the parties as disclosed by the evidence before it”: Phillips v Commonwealth (1964) 110 CLR 347 per Kitto, Taylor and Owen JJ. The court must “form its own view of the facts so far as it is able to do so”: Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd [1975] NSWLR 174 per Reynolds JA. The court exercises original jurisdiction, not appellate jurisdiction and must therefore exercise its powers whether or not there was error below: Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 per Gleeson CJ, Gaudron and Hayne JJ. Its task is to deal not only with any matter which might have arisen before the original decision making body but also with any issue which might properly arise in the meantime: Harris v Caladine (1991) 172 CLR 84 per Mason CJ and Deane J. The overall objective is, as Heydon JA pointed out in A Goninan v Gill, to determine the matter in the way in which the costs assessor should have determined it.

58 There is no discretion upon a hearing de novo to confine the scope of the debate or the issues to be canvassed. In Barendse v Comptroller General of Customs (1996) 136 FLR 243, it was pointed out in the joint judgment of Beasley JA and Grove and Ireland JJ that, upon a hearing de novo by way of appeal under s.122 of the Justices Act 1902, the nature of the appeal cannot be changed by a direction of the court or by an agreement, express or implied, between the parties, although the tribunal might be entitled (but not bound) to accept as appropriate a procedure based on mutual concessions. The point is that there is no power, upon a hearing under s.208M(4), to limit the matters that may be canvassed or to place restrictions on the evidence that may be adduced.

Features of the s.208NC review process

59 The alternative envisaged by s.208NC entails a much more controlled process under which a case seen by the court to warrant further attention is referred to a review panel which then deals with it in the usual way.

60 In the normal course of events, a review panel operating under s.208KC considers the matter by reference only to the evidence that was received by the costs assessor who made the original determination and does not receive new submissions from the parties or fresh evidence or evidence in addition to or in substitution for that received by the costs assessor. Importantly, however, there is discretion under s.208KC(3) for a review panel to depart from this normal course. It may decide to receive submissions or new evidence or both.

61 A review panel, unlike the court, thus has the ability to tailor its procedure in a flexible way to permit only such submissions and new evidence as it deems conducive to a proper determination of particular issues considered to be in need of further exploration. The procedure is inherently more flexible than a new hearing by the court.

62 It must also be remembered that a review panel is a specialist review body created by statute to deal with a specialised area of practice and decision-making. Courts will generally prefer to see questions in such an area dealt with by the particular specialist body unless there is some clearly demonstrated need for a court to be involved: NSW Breeding & Racing Stables Pty Ltd v Administrative Appeals Tribunal (2001) 53 NSWLR 559. There is much to be said for the view expressed by Master Malpass in a number of cases that, generally speaking, dissatisfaction with an assessment made by a costs assessor should be dealt with in the first instance by the review procedure under Subdivision 4A of Division 6: Croker v Commissioner of Taxation [2001] NSWSC 188, Casaceli v Morgan Lewis Alter [2001] NSWSC 211, Firth v Kasumovic [2001] NSWSC 341, Kioussis v M D Nikolaidis & Co [2001] NSWSC 353, Thurai Rajah v Villanueva [2001] NSWSC 597.

63 A decision or determination of a review panel is subject to appeal to the court under s.208L or s.208M in the same way as a decision or determination of a costs assessor: see s.208KI.

The plaintiffs’ complaints about the assessments

64 The plaintiffs took me to the documents that were before the costs assessor. These were placed before me in two groups, one consisting of the documents containing references to the financial arrangements between the defendant and his lawyers to which the costs assessor referred in his determination and accompanying reasons and the other consisting of those containing pertinent references to which no reference was made by the costs assessor. There were nineteen documents in the first group and 28 in the second. The two groups became Exhibit B and Exhibit C respectively. There is some overlap between the two groups of documents in the sense that several documents appear in both. There are ten such documents. The overlap occurs because a particular document may contain both a passage to which the assessor did refer and another passage which the plaintiffs consider material but to which the assessor did not refer.

65 By reference to the documents in the second group (Exhibit C), the plaintiffs sought to show that there had been before the costs assessor a volume of material referring to “pro bono” representation. Furthermore, much of the material in the second group covered a period of time proximate to that occupied by preparation for and conduct of the proceedings, while the material in the second group concentrated more upon later stages. It is desirable that I outline briefly those parts of the content of the second group upon which the plaintiffs place weight. I do so by reference to the tab numbers in Exhibit C:

Tab 1 : Letter dated 5 April 1995 from one of the defendant’s lawyers (Ms Lydiard, a barrister) to the Legal Services Commissioner referring to her agreement in 1994 to act for the defendant “on a pro bono basis”.

Tab 2 : Affidavit of Ms Lydiard sworn 2 March 1995 stating that she is “acting pro bono for” the defendant.

Tab 3 : Letter dated 10 March 1995 from another of the defendant’s lawyers (Ms Preston, also a barrister) referring to an “application for pro bono referral”.

Tab 4 : File note “10/3” by an unidentified person stating, “Advice from G Preston that a solicitor has been found”.

Tab 5 : Letter dated 21 March 1995 from the Law Society’s Pro Bono Solicitor to Mr Licardy, solicitor (the third of the defendant’s lawyers), referring to the writer’s understanding that Mr Licardy has agreed to instruct Ms Lydiard “on a pro bono basis” and enclosing a form of application to the Law Foundation Pro Bono Disbursement Fund.


Tab 6 : Transcript of proceedings before Sperling J on 31 March 1995 in which Ms Lydiard referred to the defendant as “being supported on a pro bono basis”.

Tab 7 : File note of Ms Preston recording a telephone conversation with one of the plaintiffs, Ms Wentworth, and with others referring to Ms Lydiard “working pro bono” for the defendant.

Tab 8 : Letter dated 28 August 1995 from one of the plaintiffs (Mr Russo, Ms Wentworth’s solicitor) to Mr Licardy referring to the extent of the defendant’s assets and to “the pro bono brief”.

Tab 9 : Letter dated 28 August 1995 from Mr Russo to the Law Society referring to its grant of “pro bono representation to Mr Rogers”.

Tab 10 : Letter dated 7 September 1995 from the Law Society’s Pro Bono Solicitor to Ms Wentworth concerning a forthcoming decision whether the matter “will continue to be a matter referred under the Society’s Pro Bono Scheme”.

Tab 11 : Judgment of Sperling J of 10 September 1996 referring to the possibility of the defendant’s securing “pro bono representation for the hearing of the cross claim, as he has done for the proceedings before me”.

Tab 12 : Letter dated 22 September 1995 from the Law Society’s Pro Bono Solicitor to Ms Wentworth stating that he “will not be reviewing Mr Rogers’ status as an applicant referred under the pro bono scheme”.

Tab 13 : Letter dated in 1995 from the defendant’s former solicitor to Mr Licardy as to expenses of travel by the former to Sydney to attend court and seeking arrangements for reimbursement by the Law Society “under the pro bono scheme”.

Tab 14 : Letter dated 6 February 1997 from Ms Lydiard to the defendant enclosing costs agreement for signature.

Tab 15 : Document headed “Costs Agreement” signed by the defendant and dated 10 February 1997 and relating to Ms Lydiard’s fees and disbursements.

Tab 16 : Similar “Costs Agreement” document concerning Ms Preston.

Tab 17 : Letter dated 6 February 1997 from Mr Licardy to Mr Russo stating that Mr Licardy did not advise Ms Wentworth that his acting pro bono for the defendant disentitled him to costs.

Tab 18 : Draft letter of 7 February 1997 from Mr Licardy to the Law Society containing statement of costs arrangements with counsel and seeking information on Society’s Pro Bono Scheme.

Tab 19 : Letter dated 13 February 1997 from Mr Licardy to Law Society stating costs arrangements with counsel and seeking information on Society’s Pro Bono Scheme.

Tab 20 : Affidavit of defendant sworn on 10 March 1997 stating arrangements with counsel and solicitor.

Tab 21: Law Society file note (author not identified) recording conversations with Mr Licardy on 11 March 1997 seeking clarification of pro bono costs arrangement.

Tab 22 : Affidavit of Mr Licardy sworn on 12 March 1997 as to costs arrangements.

Tab 23 : Letter dated 4 July 1997 from Legal Services Commissioner to Ms Wentworth headed “Pro bono publica [sic] and speculative arrangements” and discussing possible meanings of “pro bono”.

Tab 24 : Letter dated 16 December 1997 from Ms Lydiard and Ms Preston to defendant.

Tab 25: Letter dated 12 January 1998 from Ms Lydiard to defendant.

Tab 26: Letter dated 13 January 1998 from Ms Lydiard to Mr Licardy.

Tab 27: Part of transcript of proceedings in the Court of Appeal (Handley JA, Stein JA and Sheppard AJA) on 7 December 1998 containing exchanges arguendo on the possible meaning of “pro bono”.

Tab 28 : Copy of defendant’s submissions on costs dated 1 May 1997.

66 The items which were also in Exhibit B (i.e., were referred to in the costs assessor’s statement of reasons) are those at Tabs 4, 5, 14, 15, 16, 17, 19, 20, 22 and 27.

The costs assessor’s findings on the basis of retainer

67 At paragraph 4(b)(x) of his Statement of Reasons in each determination (wrongly numbered 4(b)(ix) in 91247/00), the costs assessor said:

“The question of the nature of the retainer between the Applicant and Gayle Preston of Counsel, Virginia Lydiard of Counsel and/or Richard Licardy & Co was determined to be no win/no pay and not pure pro bono (i.e. pro bono publico) for the following reasons:
(aa) The Bar Association by its Circular 71/93 dated 29 September 1993 called for Members to join a voluntary pro bono legal aid scheme, that is on an unpaid basis.
(bb) the Bar Association by its Circular 85/93 dated 26 October 1993 clarified Circular 71/93 and advised that pro bono volunteers in civil work would be on the basis of no win/no pay.
(cc) By Circular dated 26 May 1994 Tobias QC on behalf of the Bar Association called for Senior and Junior Counsel to assist the Applicant in litigation between the Applicant and the First Respondent. He indicated that Senior and Junior Counsel had been briefed on a no win/no pay basis to represent the First Respondent and that the previous solicitor, Trevor Khan of Khan & McLean was acting on a no win/no pay basis.
(dd) The Bar Association by its letter dated 3 March 1995 acknowledged that Ms Lydiard’s appearance pro bono for Mr Rogers was in no way facilitated by the Bar Association.
(ee) Preston in her letter of 10 March 1995 enclosed an application to the Law Society by the Applicant for the appointment of a pro bono solicitor to assist Lydiard and herself in relating to setting aside the Order of Justice Loveday.
(ff) On 10 March 1995 Preston advised the Law Society by telephone that a solicitor had been found.
(gg) Correspondence passed between Licardy and the Law Society during 1995 in relation to payment of disbursements from the Law Foundation Pro Bono Disbursement Fund.
(hh) On 6 February 1997 Lydiard advised the Applicant that she was in a position to seek indemnity costs from the Respondents, that the costs were considerable and that they were updating their bill. She also enclosed fee agreements for Preston and herself.
(ii) By letter dated 6 February 1997 Licardy advised the Second Respondent that he did not inform the First Respondent that acting pro bono disentitled him to costs.
(jj) On 10 February 1997 the Applicant signed acknowledgments to Lydiard and Preston that fees are on a no win/no pay basis.
(kk) By letter dated 13 February 1997 Licardy advised the Law Society that it was agreed with the Applicant that in the event that the Applicant was successful in defending the proceedings and the Applicant obtained an Order for costs then Counsel and Licardy’s costs would be paid.
(ll) The Applicant in his Affidavit of 6 March 1997 acknowledged that the agreement with Lydiard and Preston was on a no win/no pay basis.
(mm) The Applicant in his Affidavit of 10 March 1997 acknowledged that the agreement with Lydiard and Preston was on a no win/no pay basis.
(nn) Licardy in his Affidavit of 12 March 1997 acknowledges that Lydiard, Preston and himself agreed with the Applicant to act on a no win/no pay basis.
(oo) By letter dated 19 December 1997 to Shand QC the Applicant requested him to act on a no win/no pay basis.
(pp) Preston in Transcript dated 7 December 1998 challenged the First Respondent’s assertion that Preston was acting pro bono.
(qq) Lydiard in Transcript dated 20 February 1998 said that she was acting pro bono but this meant on a contingency basis. She said that the Bar Association itself had sent out a leaflet on the issue.
(rr) I am satisfied that Lydiard and Preston were acting on a no win/no pay basis in accordance with the Bar Association’s Circular 85/93 and the Circular of Tobias QC of 26 May 1994 in that pro bono for Counsel in a civil action meant no win/no pay and that after 10 February 1997 this was confirmed by the acknowledgments of that date. I am also satisfied that Licardy was not appointed by the Law Society as a pro bono solicitor, that there was confusion between the Law Society and himself as to the basis on which he was retained by the Applicant but that he was retained by the Applicant throughout on a no win/no pay basis.”

68 The passage just quoted appeared after a discussion of the requirements for disclosure under Division 2 of Part 11, a discussion of the indemnity principle and its effects and express findings not only that the disclosure requirements had not been satisfied but also that there was no costs agreement. Then followed this paragraph 4(b)(ix):

“The effect of the above is that subject to the question of whether the Legal Practitioner or Practitioners instructed by the Applicant were acting on a pure pro bono (ie, pro bono publico) basis the Legal Practitioner or Practitioners are only entitled to recover costs not exceeding those costs which an Assessor considers reasonable on a solicitor/client basis pursuant to Section 201 of the Legal Profession Act.”

It is clear from the context and, in particular, from paragraph 4(a)(iv) that “pure pro bono” was an expression used by the assessor to describe a situation where the client has no liability for costs in any circumstances.

69 The assessor’s statement of reasons deals in a comprehensive way with the various indicators in favour of a finding of “no win/no pay” appearing in the documents that were before him and before me on the present application. It does not, in express terms, refer to a number of other documents, particularly those referring to “pro bono” representation. I shall consider those other documents presently. First, however, it is useful to deal with the meaning and significance of “pro bono”.

“Pro bono”

70 The plaintiffs say, in essence, that the expression “pro bono”, used in a context of the kind now under discussion, indicates an agreement to provide legal services without any expectation whatsoever of payment or other reward. “Pro bono” is, of course, a shortened version of “pro bono publico” – “for the public good”. In its general meaning, it therefore carries overtones of community service or voluntary work for some worthwhile object. As applied to legal work and charging of fees by lawyers, the expression no doubt has some general connotation of that kind but, in the end, cannot be seen as having any definite or fixed meaning except by reference to a particular context.

71 Under Order 80 of the Federal Court Rules, the registrar of that court maintains a panel defined by the rules as the “Pro Bono Panel” on which are entered the names of practitioners who have agreed to participate in the scheme administered under that part of the rules. Under Order 80 rule 9, a practitioner who acts for a litigant under the scheme must not seek to recover fees or disbursements for doing so unless an order for costs is made in favour of that litigant, in which event the practitioner can recover the amount awarded. Arrangements of that kind explain the use of the words “pro bono” in the following passage in the judgment of French J in Schokker v Commissioner of Taxation [2000] FCA 1734:

“A Senior Counsel at the Western Australia Bar agreed, on a pro bono basis, to represent a taxpayer in an appeal to the Full Court. He would only recover his fees if the appeal was successful and a costs order was made in favour of the taxpayer.”

Because of the terms of the particular scheme and the labels it employs in its terminology, what might, in more general terms, be described as “no win/no pay” is in that context classed as “pro bono”.

72 It is no doubt possible to find examples of the use of the term “pro bono” to describe a situation where a lawyer waives all right to payment, regardless of circumstances. In many cases the waiver would be forthcoming because of the client’s limited financial resources and may not be intended to relieve any third party. Other meanings are also possible. The December 1994 issue of the “Law Institute Journal”, the journal of the Law Institute of Victoria, reported at pages 1128 and 1129 results of a survey of the 56 Victorian firms with seven or more Victorian partners as to their understanding of what was involved in “pro bono” work. Some of the findings were as follows:

“Most firms gave vague definitions of pro bono, and almost every definition given was different in some way from all the others.
Mallesons Stephen Jaques wrote that pro bono was ‘Free legal work aimed at assisting disadvantaged and needy individuals within the community and organisations which assist such individuals. It does not include free or discounted legal work motivated by considerations of practice development, kinship, or friendship’.
Arnold Bloch Leibler was more circumspect: ‘ Our definition is flexible and changes according to the particular circumstances. However, pro bono work can include discounted charge-out rates, charging of disbursements only, and in some cases no charges whatsoever’.
Other responses:

· ‘Undertaking work of a legal nature or otherwise, normally chargeable, but not charged.’

· ‘Legal work done for free in cases of extreme hardship or for non-profit organisations.’

· ‘Work done for free or a no win/no fee basis.’

· ‘Work done free.’

73 I quote this report not because it is in any way authoritative but merely to illustrate the reality (if it needs to be illustrated) that “pro bono”, used in isolation, is not regarded among lawyers as carrying any single message.

74 The uncertain meaning of “pro bono” was discussed by members of the Court of Appeal in Wentworth v Rogers [1999] NSWCA 403, one of the matters in which an order for costs relevant to the present application was made. The Court had occasion to consider the expression in the context of arguments formulated on the basis advanced by the plaintiffs on the hearing before me. It also had occasion to refer to the earlier decision in Graham v Aluma-Lite Pty Ltd (unreported, NSWCA, 25 March 1997) in which an argument of the kind the present plaintiffs seek to advance was put on the basis that “pro bono” means “absolutely free of charge”. The joint judgment of Handley JA, Stein JA and Sheppard AJA in Wentworth v Rogers contains the following passage:

“It was submitted on behalf of Ms Wentworth and Mr Russo that Mr Rogers was not entitled to recover any costs because his solicitor and counsel were retained ‘pro bono’. There is evidence to support the conclusion that they were retained on this basis but, nevertheless, there is no concession by counsel for Mr Rogers that that was the basis of their retainer. In any event there are questions of precisely what a retainer ‘pro bono’ means.
Of relevance in relation to this matter is a letter dated 4 July 1997 from the Office of the Legal Services Commissioner to Ms Wentworth included by her in one of her written submissions. Among other things the letter says:
[Their Honours then quoted part of the letter at Tab 23 of Exhibit C]
The various meanings which the expression ‘pro bono’ may have in practice illustrate the need for there to be evidence of the precise terms of the retainer of counsel and solicitors who are acting in this way. So far as we are aware, that matter has not been the subject of investigation by any previous court or registrar. The present practice of the Court requires that costs, if not agreed upon, must be assessed, not taxed as was formerly the case. Reference may be made to s76(1)(c) of the Supreme Court Act and to Pt 11 of the Legal Profession Act 1987. Division 6 of that Part deals with assessment of costs. Section 199 to s202 provide for various applications for the assessment of costs. Section 203 deals with the manner in which an application is made, s204 with the persons who are to be notified of the application and s206 with the referral of matters to costs assessors. Section 207 provides that a costs assessor may require a person to produce any relevant documents of or held by the person in respect of the matter. The assessor may also require further particulars to be furnished and may require those particulars to be verified by statutory declaration. Section 208 provides that a costs assessor must not determine an application for assessment unless the costs assessor has given both the applicant and any barrister, solicitor or client or other person concerned a reasonable opportunity to make written submissions in relation to the application and has given due consideration to any submissions so made. Section 208(2) provides that, in considering an application, a costs assessor is not bound by rules of evidence and may inform himself or herself of any matter in such manner as he or she thinks fit.
Ms Wentworth and Mr Russo objected strenuously to the notion that the terms of the retainer of counsel and solicitor for Mr Rogers should be determined by a costs assessor. Confronting them, however, is the decision of this Court in Graham v Aluma-Lite Pty Ltd (25 March 1997, Court of Appeal). One of the questions which concerned the Court in that matter was whether the appellant’s costs could include anything for the appellant’s counsel’s fees since counsel had been acting pro bono. It was submitted that pro bono meant ‘absolutely free of any charge’. In relation to this matter Priestley JA said (at 11):
‘… the matter raised in [the] point was something for the Costs Assessor to consider. It appears from the materials before us in this application that submissions were put to him on the point. Presumably, the proper way of pursuing that point would be to pursue whatever avenues of review or appeal may be available against the Costs Assessor. I do not wish to encourage Aluma-Lite to think that if such avenues are available success will lie at the end of the road. Without having heard argument on the matter, it nevertheless seems to me a doubtful proposition. The answer to the question would depend upon an examination of a number of considerations, including the actual terms upon which counsel agreed to do the work he was asked to do on behalf of Mrs Graham by the Manager of the New South Wales Bar association’s Legal Assistance Scheme. The court does not know what the terms of counsel’s engagement were. But, in any event, as I have indicated the question, in my opinion, is not one for this court. It is for the Costs Assessor in the first instance and thereafter whatever the Supreme Court Act and Rules provide for review or appeal.’
During the course of the hearing we indicated to the parties that we were disposed to follow what Priestley JA had said. His judgment was agreed in by Mason P and Cole JA and it behoves us to follow it unless we are convinced that it is not correctly decided. In our respectful opinion, it is correctly decided. We do not see what other course there is that could be taken. It follows that the submissions made by Ms Wentworth and Mr Russo that no order for costs should be made in favour of Mr Rogers because his counsel and solicitor had acted pro bono should be rejected.
Of course that does not mean that eventually Ms Wentworth and Mr Russo may not be successful on the point they have taken. The reason the submission has been rejected is because this Court is not the appropriate forum to deal with it. Even if Mr Rogers is not entitled to recover any professional costs for the work done by his counsel and solicitor, he may still be entitled to recover on an assessment for any disbursements and witnesses’ expenses he has incurred. See Cachia v Hanes (1994) 179 CLR 403.”

75 The importance of the whole of the surrounding circumstances in determining the meaning of “pro bono” in a particular case was emphasised in both Wentworth v Rogers and Graham v Aluma- Lite. It is therefore not surprising that respondents to the Law Institute’s survey came up with so many different answers to the question of the meaning of “pro bono” divorced from context.

76 It is plain that the expression “pro bono” is not of itself determinative of the question whether a lawyer is entitled to recover costs, although it must, I think, be generally accepted as indicating at least that the lawyer will not seek a fee for service at full rates chargeable upon the client’s own resources. Some element of concession is involved with a view to relieving the financial burden upon the client. While “pro bono” may be applied to a case where remuneration is not recoverable in any circumstances whatsoever, it is also, as a matter of general usage, applied to various other cases, including, in particular, the case where the right to recover is foregone or the quantum is reduced only to the extent that remuneration would otherwise come out of the client’s pocket. It is generally a desire to spare the client, rather than anyone else, that motivates the lawyer to act on a “pro bono” basis.

77 I might add that I do not consider “pro bono” to be an expression employed only where a concession is granted because of the client’s lack of means. There may be circumstances in which clients capable of paying costs at full rates will be afforded some form of “pro bono” treatment.

The documents not mentioned

78 I return now to those of the documents in Exhibit C that are not also in Exhibit B, that is, the documents which were before the costs assessor but were not mentioned in his reasons.

79 The documents at Tabs 1, 2, 3, 6, 7, 8, 9, 10, 11, 12, 13 and 18 can be deal with together. The submissions made by Mr Officer QC on behalf of the second plaintiff (Mr Russo) and adopted by the first plaintiff (Ms Wentworth) pinpointed various parts of those documents in which the words “pro bono” appear, either alone or as part of the phrase “pro bono basis”, “pro bono referral”, “pro bono work”, “pro bono representation”, “pro bono scheme” or “pro bono scheme assistance”.

80 For reasons I have already stated, these references to “pro bono” cannot, of themselves, be regarded as calling in question the costs assessor’s finding that the applicable charging basis was of a “no win/no fee basis”. As I have explained, “pro bono”, according to one of the possible meanings of the expression, may embrace such a basis.

81 The document at Tab 24 refers to the Bar Association having called for “volunteers”. That, to my mind, does not call in question the costs assessor’s findings. It is in the same category as the “pro bono” references.

82 The document at Tab 25 is a letter of 12 January 1998 from Ms Lydiard to the defendant setting out matters in which she and Ms Preston will continue to represent him and, as to others, suggesting he approach the Bar Association for representation and enclosing the Association’s circular of 26 May 1994 and a copy of a letter of 9 October 1997 from Mr Licardy to Ms Yap. The document at Tab 26 is a letter of 13 January 1998 from Ms Lydiard to Mr Licardy enclosing a copy of the letter of 12 January 1998 to the defendant and containing information about Court of Appeal proceedings, including an intention to seek costs on the defendant’s behalf on 18 February 1998. Neither of these seems to me to indicate anything about the nature of the retainer of the defendant’s lawyers.

83 The document at Tab 27 is two isolated and non-consecutive pages of transcript of Court of Appeal proceedings on 7 December 1998, including comment by Sheppard AJA arguendo on the uncertain meaning of “pro bono” divorced from context. It adds nothing to what has already been said.

84 The document at Tab 28 is written submissions by counsel for the defendant on the question of costs in the Common Law Division proceedings at first instance. They are dated 1 May 1997. While these throw considerable light on the work counsel did, they add nothing relevant to the basis of the retainer.

85 The document at Tab 23 is the letter from the Legal Services Commissioner to the first plaintiff, Ms Wentworth, part of which was quoted in the joint judgment of Handley JA, Stein JA and Sheppard AJA to which reference has already been made. The letter deals, in a theoretical way, with “pro bono” and “speculative” retainers and comments on the “growing problem” of members of the legal profession failing to distinguish between the two, so that confusion results. The letter serves to confirm the difficulties in determining the meaning of “pro bono” to which I have already referred at length. It says nothing whatsoever about the basis of the retainer in this case.

86 The document at Tab 21 is said to be a file note made by an unidentified person at the Law Society recording two conversations with Mr Licardy. I set it out in full:

“SURNAME: ROGERS FIRST NAME GORDON
FILE NO PB 95/150
DATE COMMENTS
11/3/97 2.50 p.m. Richard Licardy phoned me back
- no costs order yet but intend to apply
- instructed in March 95
- thinks ct is aware that PB assistance but not absolutely sure
- He has nothing in writing re costs but Rogers has put on affidavit saying PB costs agreements with legal reps pay if costs awarded and if not it continue in the future I come into funds.
- Verbally told Mr Rogers that his charge out rate is $225/hr
- He will fax me a copy of the judgment and will let me know whether counsels costs agreement are in writing.
11 ? 12/3/97
T/C from Richard Licardy-Counsel has written agreements with Rogers
Counsel wont provide us with copy of judgment as they feel it is irrelevant. As ‘the ruling’ they seek from the L.S. is whether the PB scheme precludes sol. from making contingency agreement with client and recovering costs from the other side. Counsel thinks not. Drew his attention to s 184(4) LPA that is costs agreements need to be in writing or evidenced in writing.
Very upset about way P.B. scheme operates. It was never properly explained to him and there was little he received from the disbursement fund.”

87 In contradistinction to the others I have mentioned, this document does have some relevance to the nature of Mr Licardy’s retainer by the defendant. It does not, however, have any potential to call in question the costs assessor’s finding that it was of a “no win/no pay” nature.

88 A particular practical point must be made in relation to all these documents and the inferences the plaintiffs would wish to see drawn from them. In non-contentious business – conveyancing, the drawing of wills and the like – the arrangement as to remuneration is determined solely by the lawyer’s requirement or need and the client’s ability and willingness to pay. Nothing else intrudes. The decisions the lawyer and client make and the bargain they strike are unaffected by possibilities that sources other than the client’s pocket will eventually become relevant to the client’s capacity to pay. Where the client is a party to litigation, however, the position is different because of the existence of such possibilities. If the client is a plaintiff suing for damages or some other monetary remedy, the client’s pocket may eventually be augmented. Whether the client is plaintiff or defendant, he or she may become entitled to an order for costs.

89 It would be a rare lawyer who, in such a litigation context, agreed with the client (or led the client to think) that the lawyer would not make any charge for costs even if sources external to the client became available to cover them. The incentive for the lawyer to adopt that attitude and the reasons why he or she might do so are, to say the least, elusive. And it would likewise be a rare client who would entertain any expectation that the lawyer would not levy such appropriate charge as would ensure a flow of financial benefit to the lawyer from any alternative source of funds the litigation made available to cover reasonable costs. Concessional arrangements as to costs in litigation are commonly the product of recognition of the reality that the client does not have the immediate and full financial ability to pursue or defend the particular proceedings. The concern is with the client’s pocket, not the pockets of others.

90 Practical marketplace considerations of this kind make it inherently improbable that a lawyer and a client entering into an arrangement they called “pro bono” in relation to litigation would intend that the lawyer have no right to charge costs in any circumstances whatsoever. For such a conclusion to be reached it would be necessary, in my view, to see clearly not only that the client understood that it was possible that a costs order might be made in his or her favour but also that both the lawyer and the client intended that neither should derive any advantage from such an order. The virtually universal expectation of such parties (because consistent with commercial reality) would be that the lawyer should have, albeit indirectly, the benefit of that costs order and therefore that there should subsist, in the arrangement between lawyer and client, recognition of the right of the lawyer to look to the client for payment sufficient to form a basis for the operation of the costs order consistently with the indemnity principle.

91 Whether the matter is approached on the basis of contract, by way of inquiry into the possible operation of an estoppel or from the perspective of the expectation upon which a claim in restitution is based, the result is, to my mind, the same. Clearly persuasive displacement of the market realities to which I have referred would be needed to support a view that there was, in the understanding and arrangements between lawyer and client, no right to costs on the part of the lawyer sufficient to prevent the operation of the costs order on the ground that the indemnity principle was not satisfied.

Decision

92 Applying the test for leave to appeal stated in Reynolds v Whittens (above) – that is, that there is an obvious error on the face of the record and that there will be substantial injustice to the plaintiffs if the determination of the costs assessor is allowed to stand – leave is not warranted in this case. The same conclusion is reached when regard is had to the more broadly stated criteria referred to by Fitzgerald JA in Chapmans Ltd v Yandell (above).

93 The plaintiffs have not, to my mind, shown any basis upon which it might eventually be found that the costs assessor came to a wrong conclusion as to the nature of the lawyers’ right to charge, that being the only area in which they seek to challenge his findings and his determination. In advancing their arguments, they rely heavily on various references to the phrase “pro bono” but, as I have stated, that terminology is not, of itself, inconsistent with the conclusion reached by the assessor. Rather, I consider it to be consistent with expectations as to the nature of concessional client treatment in the context of litigation costs. None of the material that the plaintiffs say was not adequately taken into account by the assessor warrants any other view.

94 The existence or non-existence of a written agreement denying the lawyer’s right to charge regardless of circumstances was relevant to the assessment of costs: see paragraphs [35] to [38] and [39] above. The existence or non-existence of a non-binding but activating representation or arrangement to that effect was relevant to the possibilities of estoppel and denial of quantum meruit. The assessor’s reasons show sufficiently that the possibility of such an agreement, arrangement or representation was in his mind as he reviewed the material before him and reached the conclusion that a “no win/no fee basis” had applied, rather than what he called “pure pro bono (ie, pro bono publico)”, a basis the assessor said (at paragraph 4(a)(iv)) “prima facie imposes no liability on the party receiving the benefit for payment of costs to his legal practitioners”. No ground has been shown for any conclusion that, when the assessor found that “prima facie” position to be displaced, he may have overlooked relevant matters or failed to take into account the message conveyed by the “pro bono” references.

95 The question whether so much of the “no win/no fee” arrangement as constituted a “costs agreement” (as defined) was agreed or evidenced in writing so as to escape the effects of s.184(4) was irrelevant to the assessment of costs, given the effect of s.208H in making the content of any valid costs agreement something that a costs assessor is compelled to disregard in making a decision as to the fair and reasonable amount for costs (as distinct from a decision as to the nature of the retainer, in particular that there was or was not a costs liability to be indemnified). In making an assessment of costs awarded by order of a court, an assessor does not apply, give effect to or enforce any costs agreement that may have been concluded between the party in whose favour the order was made and that party’s lawyer. In any event, the costs assessor expressly held that there was no costs agreement (paragraph 4(b)(vii)). The finding as to the “no win/no fee” nature of the retainer was open to the assessor on the documents before him, whatever the effect of s.184(4) may have been in rendering void elements amounting to a “costs agreement”.

96 In each of 13492/01 and 13494/01, the application for leave to appeal under s.108M of the Legal Profession Act 1987 against the determination of costs assessor Mr I F Dwyer evidenced by the certificate issued by him and dated 24 October 2001 is dismissed.

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Last Modified: 08/15/2002