Wood v Delta Legal Pty Ltd
[2024] WASC 216
•18 JUNE 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WOOD -v- DELTA LEGAL PTY LTD [2024] WASC 216
CORAM: FORRESTER J
HEARD: 23 FEBRUARY 2024
DELIVERED : 18 JUNE 2024
FILE NO/S: CIV 2292 of 2023
BETWEEN: JOANNE LOUISE WOOD
Plaintiff
AND
DELTA LEGAL PTY LTD
First Defendant
MARIO STRBAC
Second Defendant
Catchwords:
Legal Practitioners - Solicitors - Costs agreements - Construction of s 288 of the Legal Profession Act 2008 (WA) - Whether cost agreement 'fair or reasonable' - Whether cost agreement should be set aside
Legislation:
Family Court Act 1997 (WA)
Legal Profession Act 2008 (WA)
Legal Profession Regulations 2009 (WA)
Result:
Costs Agreement set aside pursuant to s 288(2) of the Legal Profession Act 2008 (WA)
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr A Metaxas |
| First Defendant | : | Dr C Edwards |
| Second Defendant | : | Dr C Edwards |
Solicitors:
| Plaintiff | : | Metaxas Legal |
| First Defendant | : | Delta Legal |
| Second Defendant | : | Delta Legal |
Cases referred to in decision:
Brown v Talbot & Olivier (1993) 9 WAR 70
Computer Accounting & Tax Pty Ltd v Bowen Buchbinder Vilensky [2009] WASC 171
Jovetic v Stoddart & Co (1992) 7 WAR 208
Law Society of New South Wales v Foreman (1994) 34 NSWLR 408
McNamara Business & Property Law v Kasmeridis [2007] SASC 90; (2007) 97 SASR 129
Stevenson v Zafra Pty Ltd [2021] WASCA 181
FORRESTER J:
Introduction
The plaintiff has sought orders as follows:
(a)declaring that a costs agreement signed by her on 27 September 2018 with Delta Legal Pty Ltd is void, pursuant to s 287(1) of the Legal Profession Act 2008 (WA) (LPA);
(b)in the alternative, setting aside the costs agreement pursuant to s 288(2) of the LPA;
(c)in the further alternative to (a) and (b), fixing the costs payable pursuant to the costs agreement pursuant to s 288(5) of the LPA;
(d)within 48 hours the first defendant do all things required of it to discontinue GCLM 12684/2023 against the plaintiff in the Perth Magistrates Court;
(e)costs.
For the reasons which follow I will make an order setting aside the costs agreement pursuant to s 288(2). I will also order that the costs of the application be made payable to the plaintiff, to be taxed if not agreed. The action is otherwise to be dismissed.
Evidence relied upon
The plaintiff read the following affidavits (subject to objections which were ruled upon at the hearing):
(a)affidavit of Joanne Louise Wood sworn 14 November 2023;
(b)affidavit of Arthur Metaxas sworn 11 December 2023;
(c)affidavit of Arthur Metaxas sworn 22 December 2023;
(d)affidavit of Arthur Metaxas sworn 10 January 2024; and
(e)affidavit of Arthur Metaxas sworn 17 January 2024.
The defendant read the following affidavits (subject to objections which were ruled upon at the hearing):
(a)affidavit of Mario Strbac sworn 31 January 2024;
(b)affidavit of Mario Strbac sworn 16 February 2024;
Both Ms Wood and Mr Strbac were cross-examined.
Factual background
The following facts are derived from unchallenged aspects of the affidavits.
At all relevant times the second defendant, Mario Strbac, was the sole director of the first defendant, Delta Legal Pty Ltd (Delta Legal).
The plaintiff, Joanne Wood, first met with Mr Strbac on 26 September 2018, seeking advice as to a family law matter.[1] The meeting on that date lasted for approximately 1.5 hours. Ms Wood had no documents with her and said she was unable to get her file from her previous lawyers until she paid them. Mr Strbac discussed possible scenarios and outcomes of her family law matter with her and told her that Delta Legal could not act for her unless a costs agreement was signed. Mr Strbac gave Ms Wood a copy of the costs agreement to take home for consideration.[2]
[1] ts 92; Affidavit of Mario Strbac sworn 31 January 2024 [5] (First Strbac Affidavit).
[2] First Strbac Affidavit [5], [8] - [12].
Ms Wood returned on 27 September 2018. On that date, Mr Strbac went through the costs agreement with Ms Wood 'paragraph by paragraph'[3] and, in particular, advised her:[4]
(a)Delta Legal's professional fees would be charged in accordance with the costs agreement [3(c)] and that the costs are not fixed;
(b)costs estimates would be updated as the matter developed and she would be notified about it;
(c)she was welcome to approach him at any time with respect to Delta Legal's fees or any other matter as per annexure A1 of the costs agreement;
(d)she was free to terminate the costs agreement at any time;
(e)of Delta Legal's right to withhold her documents if her legal bill was not paid, and/or to lodge a caveat on her property;
(f)she had the right to question Delta Legal's fees and would have one year, from the date of the last invoice, to ask for costs to be taxed by the court.
[3] First Strbac Affidavit [14].
[4] First Strbac Affidavit [14].
Ms Wood told Mr Strbac she had read the agreement.[5]
[5] First Strbac Affidavit [14(e)].
Ms Wood signed the costs agreement and costs disclosure in relation to her family law matter (Costs Agreement).[6]
[6] First Strbac Affidavit [2(a)], [5] - [14]; Affidavit of Arthur Metaxas sworn 22 December 2023, Annexure AM-10 (Second Metaxas Affidavit).
Ms Wood paid $20,000 into the first defendant's trust account on 27 September 2018, and a further $5,000 on 28 September 2018.[7]
[7] First Strbac Affidavit [21].
Ms Wood signed a further costs agreement in relation to a partnership matter on 1 October 2018 (Partnership Costs Agreement).[8] That is not the subject of any application in these proceedings.
[8] First Strbac Affidavit [2(b)].
A payment of $27,000 was made by Ms Wood's former husband into the first defendant's trust account on 30 October 2018, pursuant to an agreement between her and her former husband.[9] On 7 November 2018 the first defendant paid $20,000 of that sum to Ms Wood.[10]
[9] First Strbac Affidavit [21]; ts 108.
[10] First Strbac Affidavit [21].
Ms Wood was billed a total of $87,593.20 under the Costs Agreement.[11] Invoices were issued as follows:[12]
[11] First Strbac Affidavit [2(a)], Annexure C.
[12] First Strbac Affidavit, Annexure C.
Date
Amount
1 October 2018
$1,645.00
1 November 2018
$15,486.70
3 December 2018
$8,357.70
3 January 2019
$4,432.00
5 February 2019
$9,996.00
3 March 2019
$15,600.00
1 August 2019
$32,075.80
The August 2019 invoice covered work done between 4 March 2019 and 1 August 2019.
On 29 April 2019 Delta Legal lodged caveat O139897 on the certificate of title of a property jointly owned by Ms Wood and her former husband (the Property). That caveat prohibited any dealings with the Property absolutely and the nature of the interest claimed by Delta Legal was as chargee.[13]
[13] Affidavit of Joanne Louise Wood sworn 14 November 2023, Annexure JLW-4 (Wood Affidavit).
On 22 May 2019 Mr Strbac had a conversation with Ms Wood in which he verbally updated her as to the accrued costs and provided an estimate of future costs.[14]
[14] First Strbac Affidavit [16], Annexure H.
On 2 August 2019 Delta Legal terminated its agreement with Ms Wood.[15]
[15] Wood Affidavit [15].
On 9 August 2019 Delta Legal lodged a further caveat, O212222, on the certificate of title for the Property, and the certificate of title of a further property, as to the interest of the plaintiff only. That caveat prevented dealing with the Property and the further property unless expressed to be subject to the caveator's claim.[16]
[16] Wood Affidavit, Annexure JLW-6.
Ms Wood engaged her present lawyers to act for her in June 2020.[17]
[17] Wood Affidavit [17].
Ms Wood originally commenced proceedings in this court on 15 November 2023, seeking pre‑action discovery of the Costs Agreement. However, Delta Legal eventually supplied the documents being sought. This was after it had commenced a general procedure claim in the Perth Magistrates Court on 5 December 2023, seeking the sum of $56,280.60 plus interest (GPC).[18]
[18] Second Metaxas Affidavit, Annexure AM-7.
On 11 January 2024 Ms Wood sought to amend the orders sought by the originating summons to instead seek orders for the removal of the caveats as well as in relation to the Costs Agreement and GPC as set out above.
On 2 and 5 February 2024 Delta Legal lodged further caveats over the Property and further property, to the extent of Ms Wood's interest only.[19]
[19] Second Strbac Affidavit, Annexure B.
On 13 February 2024 Delta Legal withdrew caveat O139897.[20] It is not entirely clear when caveat O212222 was withdrawn, but it was not listed on the certificate of tile for the Property as at 28 February 2024.
[20] Affidavit of Craig Kenneth Edwards sworn 3 March 2024, Annexure CKE-1.
The plaintiff has not sought any orders in relation to the new caveats.
Costs Agreement
The Costs Agreement between Delta Legal and Ms Wood is nine pages long, with a further four page document attached as 'A1'.[21]
[21] Second Metaxas Affidavit, Annexure AM-10.
The preamble to the Costs Agreement states:
This document is an offer to enter into a Cost Agreement with you and by accepting it you will be regarded as having entered into a Costs Agreement.[22]
[22] Second Metaxas Affidavit, Annexure AM-10.
The Costs Agreement sets out at cl 3 that Delta Legal's fees would be calculated:[23]
(a) in accordance with scale (Table A) published in the most recent Legal Profession (Supreme Court) (Contentious Business) Report. A copy of this scale is attached and it is inclusive of GST. ('T1')
OR
(b)Agreed fixed fee including GST $
OR
(c) Those members of the firm that work on your matter will record the time they spend and charge according to the following rates.
[hourly rates set out for each category of member of the firm, together with an explanation of charging by 6 minute interval units.]
[23] Second Metaxis Affidavit, Annexure AM-10.
Charges for disbursements were set out at cl 4.[24]
[24] Second Metaxas Affidavit, Annexure AM-10.
Clause 5 provided that an estimate of costs was to be found at annexure A1. Annexure A1 was entitled 'Statutory Disclosure to Clients' and purported to comply with Delta Legal's disclosure obligations pursuant to s 260 of the LPA.[25]
[25] Second Metaxas Affidavit, Annexure AM-10.
By cl 16 and cl 17, the plaintiff authorised Delta Legal to apply monies held on trust for her towards payment of their professional fees and disbursements against her, with an account to be issued within 14 days of such application.[26]
[26] Second Metaxas Affidavit, Annexure AM-10.
Clause 18 was headed 'Estimate of Cost Recoverable' and referred to annexure A1. Clause 24, entitled 'Interim Accounts', also referred to annexure A1. Under cl 27 and cl 28, Delta Legal was entitled to charge interest on monies unpaid after 30 days.[27]
[27] Second Metaxas Affidavit, Annexure AM-10.
Pursuant to cl 30, the plaintiff authorised Delta Legal to receive on her behalf monies due to her in the course of or as a result of the proceedings. Clause 38 stated, in part:
You agree to charge all your interest in any real property which you may own solely or jointly with any other person as security for your performance of the terms of this Agreement and the payment of the Fees and Disbursements and you authorise us to lodge a caveat on the title of any such real property for this purpose.[28]
[28] Second Metaxas Affidavit, Annexure AM-10.
Clause 52 stated:
You acknowledge and accept that:
(a)we have advised you that costs calculated in accordance with this Agreement may exceed the applicable scale which would otherwise apply;
(b)you may seek independent legal or financial advice concerning this Agreement before entering into it;
(c)there may be other solicitors who are willing to act for you at a lower cost or who may not require you to enter into a Costs Agreement;
(d)if you request our account(s) to be taxed by a taxing officer of any Court, we have the right to withdraw the account(s) in question and render a substituted account, which may be higher than that already presented to you; and
(e)you have read and understood all the terms of this Agreement and agree to be bound by it;
(f)you have received a copy of this Agreement including ANNEXURE A1
(g)any monies due and owing to you pursuant to the settlement in your case must be transferred through the Trust Account of Delta Legal in order for us to secure and obtain our fees.[29]
[29] Second Metaxas Affidavit, Annexure AM-10.
The plaintiff initialled all nine pages of the Costs Agreement and signed an acknowledgement that she had read and understood the document, and was instructing Delta Legal to act on the basis set out in it.[30]
[30] Second Metaxas Affidavit, Annexure AM-10.
Annexure A1 had sections referring to each subparagraph of s 260(1). A notice in accordance with Form 2 of Schedule 1 of the Legal Profession Regulations 2009 (WA) was attached as permitted by s 260(5) of the LPA.
In annexure A1, under the heading 'Basis on which Legal Costs will be Calculated (s 260(1)(a))', was stated:
1.Legal costs will be calculated in accordance with the Costs Agreement.
2.In summary, legal costs are charged on an hourly rate applicable to the lawyer or a person performing the work, calculated in a 6 minutes intervals (sic). Every 6 minutes or part of it (sic) represents 1 billable unit.
3.Examples:
●If a task takes 6 minutes, 1 unit will be charged.
●If a task takes 2 minutes, 1 unit will be charged.
●If a task takes 8 minutes, 2 units will be charged.[31]
[31] Second Metaxas Affidavit, Annexure AM-10.
As to the requirement that an estimate of legal costs be provided (s 260(1)(c)), the client was directed to [21] ‑ [ 25] of the annexure.[32]
[32] Second Metaxas Affidavit, Annexure AM-10.
As to the estimate of costs recoverable if the litigation was successful (s 260(1)(f)(i)) or unsuccessful (s 260(1)(f)(ii)), annexure A1 read:
Estimate of Costs Recoverable if Litigation Successful (s 260(1)(i)) (sic)
9.If you win the case (or part of it) you may be entitled to recover some of your legal costs from the losing party.
10.An order by a Court for payment of costs in favour of you will not necessarily cover the whole of your legal costs.
11.You must pay us the whole of your legal costs by their due dates. You cannot off-set any amount recoverable from the losing party against your indebtedness to us.
12.For our estimate of such costs, see paragraphs 21 to 25 below.
Estimate of Costs Payable by You if Litigation Unsuccessful (s 260(f)(ii)) (sic)
13.If you lose the case (or part of it) you may be ordered to pay some of the winning party's legal costs, in addition to having to pay your own legal costs.
14.For our estimate of such costs, see paragraphs 21 to 25 below.
Paragraphs [21] ‑ [25] read:
Estimate of Legal Costs (s 260(1)(b) and (f))
21 Our estimates in paragraph 25 below are made at a time when it is usually very difficult to predict all the work which will be required to be done on your behalf.
22All estimates are based on information available to us at the time the estimate was prepared.
23None of the estimates are quotes.
24 The main variables which affect the calculation of costs are:
24.1 The extent of documentary material that we must review and consider.
24.2 The complexity of the legal issues to be considered.
24.3 The complexity of the factual matrix.
24.4 The difficulty in which instructions are able to be obtained.
24.5 Whether independent Counsel is engaged to undertake part of the work.
24.6 The number of contested interlocutory applications.
24.7 The other party's attitude to the matter (e.g. belligerent or cooperative).
24.8 Generally, the nature of the work being performed.
Paragraph [25] of the Costs Agreement is on its own separate page; the second last page of annexure A1.[33]
[33] Second Metaxas Affidavit, Annexure AM-10.
The final page of the Costs Agreement is the Form 2, Form of disclosure of costs to clients, pursuant to reg 80(1) of the Legal Profession Regulations.
Neither of the last two pages of the Costs Agreement were initialled by Ms Wood. They are the only two pages which she did not initial.
Factual matters which are in dispute
Ms Wood alleges that the costs disclosure supplied to her at the time she signed the Costs Agreement was inadequate, and that disclosure continued to be inadequate during the time she retained Delta Legal as her solicitors.[34] Delta Legal and Mr Strbac do not accept this.
[34] ts 144.
Ms Wood also asserted that she instructed Delta Legal to pay her the entirety of the $27,000 deposited into its trust account by the plaintiff's former husband.[35] Delta Legal, via Mr Strbac, denies this.
[35] Wood Affidavit [11].
Ms Wood took issue with a number of individual charges in the invoices which referred to the use of a 'Document Management System' or 'DMS' on the basis that the Costs Agreement did not provide for charging in relation to the DMS and, asserts that, as it was an unusual charge, the costs disclosure should have referred to billing for this item but did not.[36] Again, this is disputed by Delta Legal and Mr Strbac.[37]
Cross-examination
Ms Wood's evidence
[36] ts 143.
[37] ts 135.
Ms Wood accepted that, as best she can recollect, on 26 September 2018 Mr Strbac gave her the Costs Agreement to take home with her.[38] She did not recall receiving a copy of the Costs Agreement until it was provided after Delta Legal lodged the GPC claim.[39] While she was provided with the entirety of her client file (both in hard copy and electronically) after Delta Legal terminated her retainer, she did not recall that the Costs Agreement was in it.[40]
[38] ts 92 - 93.
[39] ts 100; Wood Affidavit [18].
[40] ts 104 - 107.
As to the discussion about costs, the following cross‑examination took place:
The meeting of 27 September 2018, legal costs were discussed at that meeting, weren't they?--- … I cannot remember exactly what was said at that meeting back then, but one would hope that they had been touched on, but … I had no idea when he said to me 'My costs would be considerable', I had no idea what considerable meant. When I got my first lawyer, I had $10,000 in my hand, and I thought that was an absolute fortune. Only now do I realise how disgusting it is what lawyers charge.
Well, you – when you say you didn't know what considerable meant, you were told costs could have been in excess of $100,000. In fact, that was - - -?---Could be.
- - - written down?---Could be. But it didn't say that they were going to be. He said they could be. I had no idea, and he just said considerable, and he never discussed figures with me ever. Never.
But there was figures that were actually written down on the estimate forms, weren't there?---Potentially, but they were estimates.
So yes, estimates. Not - - -?---I have nothing to draw on. I have no experience of courts or legal costs or lawyers. So I have nothing to draw on in my own mind as to what costs would be or how things would go. I have no previous experience of anything to do with the legal profession and never want any ever again.
And in those estimates that you've just referred to, the estimates of 5,000 to over 100,000, you were advised that if the matter settled by way – say by way of a binding financial agreement, then there would be costs of around $5,000. It was only an estimate payable. And you were advised that if the matter went all the way to trial as an estimate costs could be in excess of $100,000, isn't that correct?---Well, if I was – and I can't recollect like I say because it's a long time ago, I don't see what difference that makes to anything.[41]
[41] ts 117 - 118.
Ms Wood could not recall if she was told that costs are not usually awarded in the Family Court.[42] Ms Wood did not recall how often she was invoiced by Delta Legal. She said she did not even recall receiving invoices.[43] When asked if she had a number of conversations with Mr Strbac about legal costs during the time she retained Delta Legal, she said:
No. I don't recall that we did. There was never an amount given. It was just - the only thing I was told that my legal costs would be substantial, and that was it. I was not given estimates or amounts. I trusted my lawyer. So I wasn't unduly worried, and as I said there was so much else going off, my legal costs in the scheme of things were not the most important thing. I was fighting for my survival.[44]
[42] ts 118 - 119.
[43] ts 109.
[44] ts 109.
Ms Wood denied that every time Mr Strbac spoke to her on the phone the issue of costs was raised.[45] She denied that she took an active interest in her costs because she didn't have much money at the time.[46] She agreed that she chose to represent herself at a conciliation conference in May 2019 but said it was because she had been 'humiliated enough' in the Family Court by Delta Legal, not because of concern about costs.[47]
[45] ts 109.
[46] ts 110.
[47] ts 112 - 114.
Ms Wood was asked about a number of specific conversations when costs were discussed, in January 2019 and either denied that they took place or said she could not recall them.[48] She did not recall initiating conversations about costs.[49]
[48] ts 119 - 122.
[49] ts 121.
Ms Wood said that at the time she signed the Costs Agreement she had no one else to represent her, but was unable to say what she was thinking about the impact of the costs estimates on her decision to sign the Costs Agreement.[50]
[50] ts 122.
Ms Wood accepted that she had sent an email on 5 November 2018 to Mr Strbac providing her bank account details for the deposit of $20,000. She did not accept that this constituted instructions which entitled Delta Legal to retain the remaining $7,000.[51] She thought she was going to get the remainder at a later date, and 'just presumed that Mr Strbac had kept the seven for himself for fees or whatever'.[52] To her recollection, she did not think of asking Mr Strbac why he kept the money. She did not want to upset him.[53]
[51] ts 98.
[52] ts 96.
[53] ts 97.
It was put to Ms Wood that 'no matter what was written in regards to the estimates of costs didn't affect your decision one way or the other' to enter into the Costs Agreement.[54] She responded:
Well, I had nobody else to represent me. I was stuck in every way. Pushed into a corner. I didn't have any choice. It was either that or self-represent myself permanently. I don't see what difference - - -[55]
Mr Strbac's evidence
[54] ts 122.
[55] ts 122.
Mr Strbac said he did not have any detailed independent recollection of his conversations with Ms Wood about costs.[56]
[56] ts 126 - 129.
Mr Strbac was asked why the Partnership Costs Agreement included an estimate of recoverable costs of 50 ‑ 80%, and a similar estimate for costs she would be required to pay if she was unsuccessful, while the Costs Agreement did not include any estimate. The following exchange then occurred:
I didn't give it to her because I told her it's – usually in the Family Court there are no winners, no losers. Courts very rarely award costs against a party – other party.
Are you saying that's what you said to Ms Wood?---That's – that's what I said to her.
Or is that what you were thinking?---No, no, no, no. That is – this is what I said to her. And I said, 'I can't tell you whether there is going to be a situation in which the costs may be awarded. If that happens, then I will alert you to the facts.' So that's why I put there 'to be advised.' And on 1 October when she signed the partnership agreement, that was only four days later. That's when I pointed to her, I said, 'This is the one that is unlike family law. There are winners and losers in this case, and then you may be hit with the costs.' I contrasted that one with the one on the 27th.
Mr Strbac, in the Family Court isn't it the case that generally parties bear their own costs unless there is something in the nature of misconduct or a refusal to act reasonably which might persuade the court to exercise a discretion to impose a costs order in favour of one party against the other. Is that generally how it works in the Family Court?---Generally, yes.
Yes?---Generally with any court.
So why didn't you just put something to the effect of generally speaking no recoverable costs in the costs disclosure for the Family Court costs agreement?---Because there is always a possibility that that may happen.
That's why I - - -?---That is the reason for it. That's one thing. Secondly, four days later I discussed that issue with her again. After that I didn't feel the need to discuss the costs with respect to the Family Court. So I just left it like that.[57]
[57] ts 130 - 132.
Mr Strbac agreed that the Costs Agreement made no reference to the DMS Delta Legal was using at the time. He denied the DMS was a 'storage facility'. It was an electronic filing system which enabled fast searching with a large number of documents.[58] He did not discuss the DMS with Ms Wood.[59]
[58] ts 132 - 134.
[59] ts 135.
Mr Strbac said that clients were charged '… extra to classify the document, to look at the document, connect them to the issues, read them and assess the value - whether it's got some probative value or not, and then connect it to a possible question…'. Clients were charged under Delta Legal's costs agreement.[60]
[60] ts 134 - 135.
Mr Strbac said that it is highly likely he used the word 'considerable' or some other similar word in relation to costs at the first meeting with Ms Wood.[61]
Resolution of factual dispute
[61] ts 136.
It is not particularly surprising that Ms Wood had very little independent recollection of her discussions regarding costs with Mr Strbac, given that they were said to have occurred in 2018 and 2019, and, as Ms Wood said, they occurred at a particularly difficult time in her life.
At times, Ms Wood's evidence was internally inconsistent. For example, it was impossible to reconcile Ms Wood's claim that Mr Strbac never discussed figures with her with her concession that she was told that her costs 'could be' in excess of $100,000.[62] She later again said that there was never an amount given as to legal costs[63] and that all Mr Strbac ever told her was that the costs would be 'considerable'.[64]
[62] ts 117.
[63] ts 109.
[64] ts 121.
Further, in my view, Ms Wood's recollections were coloured by her perception of subsequent events, and her dissatisfaction with Delta Legal's representation of her.
As a result, I do not consider her evidence was sufficiently reliable to be of assistance in determining the extent of any costs disclosure provided to her at the time the Costs Agreement was signed or in the months afterwards.
As to the retention by Delta Legal of the $7,000 from the $27,000 payment, I am satisfied, from the email correspondence combined with Ms Wood's evidence, that Ms Wood was aware that was going to occur, and at least outwardly acquiesced to Delta Legal retaining that money for costs.
At the time of his cross-examination, Mr Strbac also had little independent recollection of specific conversations with Ms Wood regarding costs.[65] However, in his affidavit he deposed that on 27 September 2018, when he took Ms Wood through the Costs Agreement:
I estimated the costs for Family Law Matter between $5,000, if the parties resolve matter by way of Binding Financial Agreement, or Form 11 Consent Orders and likely more than $100,000 if parties go for trial.[66]
[65] ts 126 - 129.
[66] First Strbac Affidavit [14].
This is consistent with [25] of annexure A1 to the Costs Agreement, which is comprised of the following table:[67]
[67] Second Metaxas Affidavit, Annexure AM-10.
Mr Strbac also deposed as to a number of other conversations in which he discussed costs with Ms Wood, and annexed a copy of his file notes. Although brief, the notes do record advice having been given as to costs in January, February, March and May 2019.[68]
[68] First Strbac Affidavit, Annexure G.
Mr Strbac was not challenged as to the veracity of any of the evidence in his affidavit as to his discussions with Ms Wood; it was simply put to him that, on 23 February 2024, he was unable to remember what was said on specific occasions.[69] Again, it is unsurprising that Mr Strbac had no independent recollection of those conversations, given the time which had elapsed.
[69] ts 127 - 129.
On the basis of the documents provided, including the extract from the Costs Agreement above, and the evidence of Ms Wood and Mr Strbac, I am satisfied that Mr Strbac did give an initial estimate of costs to Ms Wood, and subsequently did have conversations about costs with her, and that at times he referred to the amount of costs which was accruing and how they might be limited. This is consistent with the fact that invoices were being issued early in that period and Ms Wood had limited funds on trust.
In particular, having regard also to the evidence of Ms Wood, I am satisfied that Mr Strbac discussed with Ms Wood the estimate of $5,000 to more than $100,000, as set out in [25] of annexure A1 of the Costs Agreement.[70]
[70] Second Metaxas Affidavit, Annexure AM-10.
As to the fees charged by Delta Legal which used the annotation 'DMS', the evidence did not enable me to satisfactorily resolve what individual charges in the invoices were actually for. The only way in which that could be done is for each charge to be individually considered, by reference to an explanation of what was actually done. On the evidence available to me, some of the work stated to involve the DMS appeared to be no more than administrative, done out of a preference on the part of Mr Strbac to use the DMS. However, it also appeared that some of the work involved legal analysis and reference to other documents by use of the DMS.
Statutory framework and applicable legal principles
Legal Profession Act 2008 (WA)
While the LPA was repealed by the Legal Profession Uniform Law (WA), which commenced on 1 July 2022, the LPA remains the applicable legislation upon which this matter must be determined.
Part 10 div 3 pf the LPA relevantly provided as follows:
260.Disclosure of costs to clients
(1)A law practice must disclose to a client in accordance with this Division —
(a)the basis on which legal costs will be calculated, including whether a costs determination applies to any of the legal costs; and
(b)the client's right to —
(i)negotiate a costs agreement with the law practice; and
(ii)receive a bill from the law practice; and
(iii)request an itemised bill after receipt of a lump sum bill; and
(iv)be notified under section 267 of any substantial change to the matters disclosed under this section;
and
(c)an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable —
(i)a range of estimates of the total legal costs; and
(ii)an explanation of the major variables that will affect the calculation of those costs;
and
(d)details of the intervals (if any) at which the client will be billed; and
…
(f)if the matter is a litigious matter, an estimate of —
(i)the range of costs that may be recovered if the client is successful in the litigation; and
(ii)the range of costs the client may be ordered to pay if the client is unsuccessful;
and
(g)the client's right to progress reports in accordance with section 269; and
…
(4)For the purposes of subsection (1)(f), the disclosure must include —
(a)a statement that an order by a court for the payment of costs in favour of the client will not necessarily cover the whole of the client's legal costs; and
(b)if applicable, a statement that disbursements may be payable by the client even if the client enters into a conditional costs agreement.
(5)A law practice is taken to have complied with the requirement to disclose the details referred to in subsection (1)(b)(i), (ii) and (iii), (g), (i), (j) and (l) if it provides a written statement in or to the effect of a form prescribed by the regulations for the purposes of this subsection at the same time as the other details are disclosed as required by this section.
(6)A form prescribed for the purposes of subsection (5) may, instead of itself containing details of the kind referred to in that subsection, refer to publicly accessible sources of information (such as an internet website) from which those details can be obtained.
…
262. How and when disclosure must be made
(1)Disclosure under section 260 must be made in writing before, or as soon as practicable after, the law practice is retained in the matter.
(2)Disclosure under section 261(1) must be made in writing before, or as soon as practicable after, the other law practice is retained.
(3)Disclosure made to a person before the law practice is retained in a matter is taken to be disclosure to the person as a client for the purposes of sections 260 and 261.
266.Form of disclosure
(1)Written disclosure to a client under this Division —
(a)must be expressed in clear plain language; and
(b)may be in a language other than English if the client is more familiar with that language.
(2)If the law practice is aware that the client is unable to read, the law practice must arrange for the information required to be given to a client under this Division to be conveyed orally to the client in addition to providing the written disclosure.
267.Ongoing obligation to disclose
A law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under this Division as soon as is reasonably practicable after the law practice becomes aware of that change.
268.Effect of failure to disclose
(1)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been assessed under Division 8.
(2)A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been assessed under Division 8.
(3)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed and the client or associated third party payer has entered a costs agreement with the law practice, the client or associated third party payer may also apply under section 288 for the costs agreement to be set aside.
(4)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed then, on an assessment of the relevant legal costs, the amount of the costs may be reduced by an amount considered by the taxing officer to be proportionate to the seriousness of the failure to disclose.
…
287. Certain costs agreements void
(1)A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division, is void.
(2)Subject to this section and Division 8, legal costs under a void costs agreement are recoverable as set out in section 271(b) or (c).
(3)However, a law practice is not entitled to recover any amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received.
288. Setting aside costs agreements
(1)In this section —
client means a person to whom or for whom legal services are or have been provided.
(2)On application by a client, the Supreme Court may order that a costs agreement be set aside if satisfied that the agreement is not fair or reasonable.
(3)In determining whether or not a costs agreement is fair or reasonable, and without limiting the matters to which the Supreme Court can have regard, the Supreme Court may have regard to any or all of the following matters —
(a)whether the client was induced to enter into the agreement by the fraud or misrepresentation of the law practice or of any representative of the law practice;
…
(c)whether the law practice has failed to make any of the disclosures required under Division 3;
(d)the circumstances and the conduct of the parties before and when the agreement was made;
(e)the circumstances and the conduct of the parties in the matters after the agreement was made;
(f)whether and how the agreement addresses the effect on costs of matters and changed circumstances that might foreseeably arise and affect the extent and nature of legal services provided under the agreement;
(g)whether and how billing under the agreement addresses changed circumstances affecting the extent and nature of legal services provided under the agreement.
…
(5)If the Supreme Court determines that a costs agreement be set aside, the Court may make an order in relation to the payment of legal costs the subject of the agreement.
(6)In making an order under subsection (5) —
(a)the Supreme Court must apply the applicable costs determination (if any);
…
(7)In making an order under subsection (5), the Supreme Court may not order the payment of an amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been set aside.
…
(10)The Supreme Court may order the payment of the costs of and incidental to a hearing under this section.
Part 10 div 8 sets out the criteria to be considered by a taxing officer in the event of a costs assessment. Pursuant to s 301, as part of a costs assessment, a taxing officer is required to make assessments as to what is reasonable, and may have regard to a range of factors in making that assessment. Section 302 and s 303 operate upon the assessment where there is, or is not, an operative costs agreement respectively.
Section 288 of the LPA - 'fair or reasonable'
In Stevenson v Zafra Pty Ltd[71] the Court said, in relation to s 288 of the Act:
The current provision, s 288 of the LP Act, uses the language of 'fair or reasonable' (and to this extent uses language more like the UK 1870 Act). It is unnecessary and inappropriate to attempt an exhaustive analysis of the denotation of that phrase. It is sufficient, for present purposes, to observe that:
1. the word 'fair' in that disjunctive phrase is principally (albeit not necessarily exclusively[72]) directed to a consideration of the circumstances relating to the formation of the costs agreement in the context of the solicitor's position as a fiduciary and officer of the court;
2. in determining whether a costs agreement is not 'reasonable', regard should ordinarily be had to (1) whether its terms are unreasonable, and (2) whether its effect on the client is unreasonable;[73]
3. ultimately, however, the court is not confined to closed categories, and in determining whether an agreement is not fair or not reasonable, the circumstances must be considered as a whole,[74] and, in that regard, the circumstances and conduct of the parties before, when and after the costs agreement is made may be considered;[75] and
4. in determining whether a costs agreement is not fair or not reasonable, the court, at least as a starting point, would ordinarily have regard to the factors listed in s 288(3) of the LP Act.
If a court concludes that a costs agreement is not fair or not reasonable, the court may, but is not obliged under s 288 of the LP Act, to set aside the agreement. In considering whether to exercise the power conferred under s 288, the court will have regard to whether, within the context of the administration of justice, it is in the interests of justice in the particular circumstances of the case to set aside the unfair or unreasonable costs agreement.
[71] Stevenson v Zafra Pty Ltd [2021] WASCA 181.
[72] See, for example, s 288(3)(e) of the LPA.
[73] Computer Accounting & Tax Pty Ltd vBowen Buchbinder Vilensky [2009] WASC 171[83] and the cases therein referred to.
[74] Bowen Buchbinder Vilensky [83]; see also McNamara Business & Property Law v Kasmeridis [2007] SASC 90; (2007) 97 SASR 129[27], [32].
[75] Section 288(3)(d) and (e) of the LPA.
The onus is on the plaintiff to establish that the Costs Agreement should be set aside.[76]
[76] Jovetic v Stoddart & Co (1992) 7 WAR 208, 220.
Should the Costs Agreement be voided?
It is a precondition to the application of s 287 that the agreement under consideration contravene, or be entered into in contravention of, pt 10 div 6.
The plaintiff was unable to identify any basis on which it could be said that the Costs Agreement contravened any provision of pt 10 div 6, and none was apparent. Accordingly, there is no power under the LPA to declare the Costs Agreement void and the plaintiff's application for the court to do so is dismissed.
Application to set aside the Costs Agreement
Plaintiff's submissions
The plaintiff argued that any costs disclosure which provides for the practitioner to be remunerated at an hourly rate for the time spent performing legal work which fails to state that the practitioner can only charge for 'time reasonably spent' does not satisfy the requirement in s 260(1)(a) to disclose 'the basis on which legal costs will be calculated', submitting:
Without those words the client is inclined to believe that the costs charged are in accordance with the costs agreement provided the time was accurately recorded and will not understand that the mechanism for independent review also accompanies an assessment of whether the time spent was reasonable.[77]
[77] Plaintiff's written submissions filed 7 February 2024 [36] (Plaintiff's written submissions).
The plaintiff's submission relied on an extract of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 1996 (WA), in which the Legal Costs Committee indicated that it had decided to alter the basis used for fixing the scale of costs and stated:
6(4) The new scale of costs set out in the Schedule reflects the fact that the costs of legal services provided in relation to Supreme Court and District Court actions are in the main calculated by reference to the time reasonably spent in the provision of those services and by applying to that time a reasonable hourly rate, that rate varying according to the seniority and experience of the practitioner and the complexity of the work.[78]
[78] Plaintiff's written submissions [35(4)]; Legal Practitioners (Supreme Court) (Contentious Business) Determination 1996 (WA) r 6(4).
Otherwise, the plaintiff contended that Delta Legal had failed to comply with its disclosure obligations under the LPA, namely:
(a)the Costs Agreement referred to the wrong costs determination and did not comply with the requirement to disclose the basis on which legal costs will be calculated required more than a summary of hourly rates. A costs disclosure which does not state that the practitioner can only charge for time reasonably spent does not satisfy the requirement (failure to comply with s 260(1)(a) of the LPA);[79]
(b) there was no bona fide attempt to provide an estimate of the total legal costs for the matter (failure to comply with s 260(1)(c) LPA);[80] and
(c)the statement as to the costs likely payable by the plaintiff in the event of a successful or unsuccessful outcome was inadequate and should have set out that costs are generally not recoverable in Family Court proceedings unless in certain circumstances (failure to comply with s 260(1)(f) of the LPA).[81]
[79] Plaintiff's written submissions [33] - [34], [36].
[80] Plaintiff's written submissions [40].
[81] Plaintiff's written submissions [42].
The plaintiff also submitted that the defendants failed to comply with their fiduciary obligations to the plaintiff to make additional disclosure in respect of the following matters, based on Brown v Talbot & Olivier:[82]
(a)the remuneration of solicitors acting in relation to a proceeding or potential proceeding in the Family Court of Western Australia was governed by the Legal Profession (Family Court of Western Australia) Determination 2018 (Family Court Determination);[83]
(b)in the absence of a costs agreement which complied with the LPA the Family Court Determination applied;[84]
(c)the defendants were proposing to charge a minimum of 1/10th of applicable hourly rates for each item of work, whereas the Family Court Determination provided for no minimum charge;[85]
(d)an explanation of the procedure in the Family Court for a contentious application for settlement of property with a costs estimate for each stage of the proceedings;[86]
(e)the Legal Profession Uniform Law Australian Solicitors Conduct Rules 2015 (WA) did not permit the defendant to charge for document storage;[87] and
(f)the defendant's principal and employees utilised a document known as 'Masterfile DMS' and the costs implications of that system.[88]
Defendants' submissions
[82] Brown v Talbot & Olivier (1993) 9 WAR 70, 77 ‑ 78.
[83] Plaintiff's supplementary written submissions filed 30 April 2024 [8(1)] (Plaintiff's supplementary written submissions).
[84] Plaintiff's supplementary written submissions [8(2)].
[85] Plaintiff's supplementary written submissions [8(3)].
[86] Plaintiff's supplementary written submissions [8(4)].
[87] Plaintiff's supplementary written submissions [8(7)].
[88] Plaintiff's supplementary written submissions [8(8)].
The first defendant argued that s 260(1)(a) only required that the law practice disclose whether a cost determination applies, and does not stipulate that the law practice must disclose which determination applies, except insofar as is necessary to disclose the basis on which legal costs were to be calculated.[89] It was submitted that, as costs were to be calculated according to an hourly rate significantly lower than any scale, the basis for calculating legal costs was identical irrespective of which costs determination applied.[90]
[89] First defendant's written submissions filed 14 February 2024 [21(b)(i)] (First defendant's written submissions).
[90] First defendant's written submissions [21(b)(ii)].
The first defendant submitted there was no non‑disclosure contrary to s 260(1)(a), but that even if there was such a failure, it did not mean that the Costs Agreement was not fair or reasonable within the meaning of s 288 of the LPA, because Ms Wood had not been financially disadvantaged, and could not have been disadvantaged, financially or otherwise. Further, given the basis on which fees were to be calculated was lower than any scale, the error could not have materially misled or impaired Ms Wood when considering whether to enter into, or exercise any of her rights under, the Costs Agreement.[91]
[91] First defendant's written submissions [21(c)].
As to the disclosure required by s 260(1), the first defendant submitted that it had complied because:[92]
(a)the provision envisages that a practitioner's ability to provide an estimate may be limited early in the proceedings;
(b)that an estimate, albeit wide ranging, was provided, and any more narrow estimate would have risked misleading the client; and
(c)the costs estimate provided was explained and contextualised by [21] ‑ [24] of annexure A1.
[92] First defendant's written submissions [21(d)].
The first defendant contended that there had not been non‑disclosure pursuant to s 260(1)(f), because:[93]
(a)in family law matters it is the general rule that each party bears its own costs;
(b)at the time the Costs Agreement entered into, it was not possible to estimate the probability of costs being awarded for or against the client, nor the likely amount, but [9] ‑ [13] of the Statutory Disclosure form dealt with the fact that costs may be awarded, and the variables affecting it;
(c)it was expressly written that the plaintiff would need to be further advised on this matter;
(d)by reference to the estimate of the total costs of litigation, the plaintiff had notice that if costs were awarded against her they may reach a similarly large figure.
[93] First defendant's written submissions [21(e)].
The defendants did not accept that Brown was authority for the imposition of the fiduciary obligations to disclose asserted by the plaintiff, and sought to distinguish Brown from the present case.[94] The defendants rely upon the guidance provided by Stevenson and submit that there is no basis for imposing a higher standard with regards to fiduciary duties than the court applied in that case.[95]
[94] Defendants' supplementary written submissions filed 15 May 2024 [3] (Defendants' supplementary written submissions).
[95] Defendants' supplementary written submissions [14].
Disposition
Whether a legal practice has failed to make any of the disclosures required under pt 10 div 3 (which includes s 260) is a factor specified in s 288(3) as being a matter to which the court may have regard in determining whether a costs agreement is fair or reasonable.
Alleged non-disclosure contrary to s 260(1)(a) LPA
A law practice was required, under s 260(1)(a) of the LPA to disclose, in writing, the basis on which legal costs will be calculated, including whether a costs determination applies to any of the legal costs.
The Costs Agreement in this case set out three different bases for the calculation of legal fees to be charged by Delta Legal:[96]
(a)in accordance with scale (Table A) published in the most recent Legal Profession (Supreme Court) (Contentious Business) Report (first basis);
(b)an agreed fixed fee (none was stated) (second basis);
(c)based on time spent according to hourly rates charged by six minute intervals (third basis).
[96] Second Metaxas Affidavit, Annexure AM-10.
It appears that (a) was a reference to the Legal Profession (Supreme Court) (Contentious Business) Report 2016 (WA), which had been superseded by the time the plaintiff signed the Costs Agreement. Neither that determination, nor the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2018 (WA), which came into operation on 1 July 2018, was attached to the Costs Agreement.
The scale properly applicable to the matter the subject of the Costs Agreement was, in fact, the Family Court Determination, which came into operation on 1 July 2018.
The Costs Agreement did not specify any particular one of the three bases as being the basis on which fees would be calculated in Ms Wood's case. The fact that no fixed fee was stated in (b) potentially implied the second basis did not apply. However, nothing was contained in the main body of the Costs Agreement which indicated that the only, or even the principal, method of the calculation of fees charged was to be on the third basis.
Annexure A1 did not clarify the matter. While [2] did commence with the words 'In summary, legal costs are charged on an hourly rate …', [1] stated that costs will be calculated in accordance with the Costs Agreement. Neither paragraph made clear that fees would not be calculated pursuant to the first basis.[97]
[97] Second Metaxas Affidavit, Annexure AM-10.
Given that 'Table A' of the Supreme Court determination referred to in the first basis also set out hourly rates, albeit different rates to those set out in the third basis, it was necessary to identify with specificity which of those bases applied.
Delta Legal acknowledges that the invoices sent to Ms Wood[98] were all charged exclusively on the third basis.[99]
[98] Wood Affidavit, Annexure JLW-2.
[99] First defendant's written submissions [21(a)(iv)], [21(b)(ii)].
The invoices did not set out how many units of time were spent on any particular task, who performed them, or what hourly rate had been applied; they set out the date, the task(s) carried out, the applicable GST for the task(s), and the total charge for the task(s). It was therefore not possible to discern from the invoices on which of the first and third bases in the Costs Agreement the fees had been calculated.
Delta Legal contended that the LPA did not require identification of the applicable scale in this case because it was not necessary to achieve appropriate disclosure of the basis on which legal costs will be calculated. Accordingly, it argued, the error in the identification of the applicable scale was of no moment.
I do not accept this contention. Firstly, it is predicated on a finding that the third basis was unambiguously the method by which the plaintiff's legal costs would be calculated in this case. As I have already identified, the Costs Agreement did not make this clear, either by explicitly nominating the third basis, or excluding the first basis. Accordingly, it could not be said that identification of the relevant determination was not necessary in order to properly disclose the basis on which legal costs would be calculated.
Secondly, the Costs Agreement did not merely omit to identify the determination which would otherwise be applicable; it was positively misleading as to the applicable determination. Even if it was not necessary to identify the applicable scale, having chosen to identify one, it was incumbent on Delta Legal to identify the correct one.
Thirdly, the difference between the Family Court Determination and any Supreme Court determination was significant. The latter set out the maximum amount which could be charged in the ordinary course for various common steps in a proceeding, as well as hourly rates for other tasks. The former set out only hourly rates for work performed.
It is not just the reference to the wrong determination which makes the non‑disclosure material. By necessary inference, it highlights the lack of attention which was given to fully explaining the difference between the manner in which costs would be calculated under the determination and their manner of calculation under the Costs Agreement. Had closer attention been paid to this obligation, the error must surely have been noted and corrected.
In those circumstances, I am satisfied that the omission to refer to the appropriate scale meant that the defendants failed to sufficiently comply with the requirements of s 260(1)(a).
I turn to the submission that a costs agreement which fails to state that the practitioner can only charge for 'time reasonably spent' does not satisfy the requirement in s 260(1)(a) to disclose the 'basis on which legal costs will be calculated'.
The submission relies upon a statement made by the Legal Costs Committee in 1996 in relation to Supreme Court and District Court actions, not proceedings in the Family Court. The change in the basis used to fix the scales which applied in the case of Supreme Court and District Court actions was not applied in the case of Family Court proceedings. Family Court determinations did not change to provide the maximum cost allowed for specific items; even today they provide only for a maximum hourly and daily rate according to the experience of the person performing the relevant service.
Further, notwithstanding the comprehensive requirements of s 260 of the LPA, enacted in 2008, as to disclosure in relation to costs, the legislature did not impose a requirement for written disclosure in the terms contended for by the plaintiff. There is no basis for reading such an additional requirement into the statutory text.
Finally, if such a statement were to be regarded as an essential part of disclosure, one might expect it to have been included in the list of matters of which notice was required to be given with every bill, by s 291 of the LPA. It was not.
Having regard to those matters, I do not accept the submission that disclosure which fails to state that the practitioner can only charge for time reasonably spent is insufficient to satisfy s 260(1)(a).
The plaintiff also submits this requirement is part of the general fiduciary obligations of disclosure as to costs. I will deal with this submission in more detail below.
Alleged non-disclosure contrary to s 260(1)(c) LPA
Section 260(1)(c) required that a law practice disclose to their client an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect that calculation of those costs.
The disclosure provided by Delta Legal was that legal costs payable under the Costs Agreement plus GST and disbursements were estimated to be within the range of $5,000 to more than $100,000. Annexure A1 indicated that it was usually very difficult to predict all the work to be done at the time the estimate was provided. It listed eight main variables which affect the calculation of costs.
Counsel for Ms Wood accepted that it was appropriate for Delta Legal to provide an estimated range and to specify the major variables which affect the calculation of costs.[100] However, he submitted that provision of the estimate of $5,000 to $100,000 or more 'was not even an attempt to comply with the LPA'.[101]
[100] Plaintiff's written submissions [40].
[101] Plaintiff's written submissions [40].
I do not accept that submission. The plaintiff did not provide Mr Strbac with any documents at the time she retained Delta Legal. On her own evidence, she was in a 'terrible state' and 'didn't understand anything'.[102] In those circumstances, any legal practitioner would have had significant difficulty in estimating the likely legal costs at the time of the signing of the Costs Agreement, or even a range of those costs. While the range was given was very broad, there is no evidence that, at the time it was made, it was inaccurate. Further, the plaintiff did not identify any major variable which affected the calculation of costs which was not identified in annexure A1.
[102] ts 105.
It is to be expected that such a wide‑ranging estimate could have been narrowed as the proceedings progressed and more information became available. That is no doubt part of the reason why provision existed in the LPA for updated disclosure, in s 267. That section provided that a law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under pt 10 div 3 as soon as is reasonably practicable after the law practice becomes aware of that change.
The only evidence of any written update as to the estimate of costs after 27 September 2018 was a letter dated 2 August 2019.[103] That was also the date on which Delta Legal terminated Ms Wood's retainer.[104] In that update, Ms Wood was advised that she had so far incurred $86,918.80 in legal costs, that her estimated costs up to and including the Pre Hearing Conference were approximately a further $20,000 ‑ $30,000, and her likely trial costs approximately a further $50,000.[105]
[103] Wood Affidavit, Annexure JLW-5.
[104] First Strbac Affidavit, Annexure J.
[105] Wood Affidavit, Annexure JLW-5.
Despite the Costs Agreement stating that invoices were generally to be issued at least once a month, no invoices were issued by Delta Legal to Ms Wood between 3 March 2019 and 1 August 2019. The invoice dated 1 August 2019 includes fees charged for work carried out at frequent and regular intervals between March and August 2019 and totalled more than $32,000. There is no evidence as to why invoices were not issued more regularly during this period.
There is evidence that Ms Wood was verbally provided information regarding her legal costs at a meeting with Mr Strbac on 22 May 2019.[106]
[106] First Strbac Affidavit [16], Annexure H.
Section 267 of the LPA required the disclosure of any significant change to anything included in a disclosure already made under pt 10 div 3 to be in writing. However, the plaintiff did not make any submission that there was any significant change to the costs estimate which required a written update pursuant to s 267.
Even if there was no requirement for a written update, it would have been desirable for Ms Wood to be provided with more regular written information, at least by way of invoices, as to the amount of legal costs she was incurring in her matter.
However, in my view, having regard to the difficulty of arriving at an accurate estimate, and the stage of the proceedings at which the estimate was given, the range provided, while broad, was not an unreasonable one, and it was not shown to be otherwise by any event which subsequently occurred.
Accordingly, I am not satisfied, on the basis of the evidence adduced at the hearing, that Delta Legal did not sufficiently comply with its obligations of disclosure pursuant to s 260(1)(c).
Alleged non-disclosure contrary to s 260(1)(f) LPA
If a matter is litigious, s 260(1)(f) required that a law practice disclose its estimate of:
(i)the range of costs that may be recovered if the client is successful in the litigation; and
(ii)the range of costs the client may be ordered to pay if the client is unsuccessful.
The written disclosure provided to Ms Wood was contained in [9] ‑ [14] and [25] of annexure A1.[107] Paragraphs [9] ‑ [14] are reproduced above. Those paragraphs clearly reflect the position as it would be in a civil proceeding, but do not reflect the position under the Family Court Act 1997 (WA) which is that, subject to certain provisions of the Family Court Act, each party to proceedings under the Family Court Act is to bear their own costs.[108]
[107] Second Metaxas Affidavit, Annexure AM-10.
[108] Family Court Act 1997 (WA) s 237(1).
Further, in the case of each of the required disclosures in [25], Mr Strbac wrote 'TBA'.[109] In evidence, he agreed that costs are usually not awarded in Family Court matters unless there was misconduct or unreasonable behaviour. However, he said that that was always a possibility, so he did not want to rule it out, which is why he wrote 'TBA'.[110]
[109] Second Metaxas Affidavit, Annexure AM-10.
[110] ts 131.
It was submitted on behalf of the defendants that it 'would be going stronger than what would be warranted' to tell a client that they were unlikely to be paid costs in the Family Court before any documents had been provided to Delta Legal.[111] However, it was also conceded that even after the documents were provided, no written update was provided to Ms Wood in this respect, and that there was no evidence that the issue was addressed orally with her at any point.[112]
[111] ts 71.
[112] ts 72.
Section 260(1)(f) required an estimate to be given. It did not allow for disclosure to be deferred to some later date. If, on the information available to Delta Legal, the prospect was that Ms Wood would not be entitled to recover costs, but would also not be required to pay her former husband's costs, there was no reason she could not have been provided with that information in writing. If that substantially changed at any point, a written update could readily have been provided.
Instead, the effect of the Costs Agreement was to inform Ms Wood in writing that she may be entitled to recover some of her legal costs, or may be liable to pay some of her former husband's legal costs. There is no evidence that at any stage Mr Strbac or anyone else at Delta Legal considered this a likely, or even possible, scenario in Ms Wood's matter.
Having regard to these matters, I am satisfied that there was insufficient compliance with the disclosure requirement of s 260(1)(f) of the LPA.
Fair or reasonable
As part of the Costs Agreement, the plaintiff signed an acknowledgement that she had read and understood it. No evidence was adduced to the effect that Ms Wood did not understand what was contained in the Costs Agreement. The issue is whether what was not disclosed, and/or what was not contained in the Costs Agreement, results in the court being satisfied that the Costs Agreement should be set aside on the basis that it was not fair or reasonable.
Neither party made specific submissions directed at the factors set out in s 288(3) of the LPA, except s 288(3)(c), being the failure to make disclosures required under div 3. I have addressed those matters above.
In supplementary submissions,[113] the plaintiff alleged breaches of fiduciary duty as set out in [83] above. The defendants disputed that those fiduciary duties existed, or that they were breached.[114]
[113] Plaintiff's supplementary written submissions [4] - [8].
[114] Defendants' supplementary written submissions [14] - [17].
There is no suggestion that the plaintiff was induced to enter into the agreement by any fraud or misrepresentation, or that there has been any adverse finding against any person acting on behalf of the law practice.
As to s 288(3)(d), the unchallenged evidence was that, at the meeting between Ms Wood and Mr Strbac on 27 September 2018, it was verbally explained to Ms Wood that Delta Legal's costs were to be calculated in accordance with the Cost Agreement [3(c)].[115] While the legislative requirement is that the disclosure be in writing, the fact that a verbal explanation was given is a relevant consideration in determining whether the circumstances in which the Costs Agreement was entered into render it not fair or reasonable.
[115] First Strbac Affidavit [14].
As to the estimate of costs recoverable, during cross‑examination of Mr Strbac, the following exchange took place:[116]
Why didn't you give her an estimate in relation to the Family Court proceeding?---Why I didn't have estimate in relation to the Family Court proceedings, we discussed it when she came on the 27th. I didn't give it to her because I told her it's – usually in the Family Court there are no winners, no losers. Courts very rarely award costs against a party – other party.
Are you saying that's what you said to Ms Wood?---That's – that's what I said to her.
Or is that what you were thinking?---No, no, no, no. That is – this is what I said to her. And I said, 'I can't tell you whether there is going to be a situation in which the costs may be awarded. If that happens, then I will alert you to the facts.' So that's why I put there 'to be advised.'
[116] ts 131.
That evidence was not challenged in cross‑examination and there is no particular basis for not accepting it. Again, while s 260(1)(f) required disclosure on this issue to be written, the fact that it was provided verbally is a relevant factor in determining whether the Costs Agreement was not fair or reasonable.
Balanced against the fact that verbal explanations were given as to the basis upon which Delta Legal's costs were to be calculated and as to costs recoverable, is Ms Wood's unchallenged evidence as to her state of mind, namely that, at the time she signed the Costs Agreement, she had nobody else to represent her, she was stuck in every way, and pushed into a corner.[117] Indeed, she deposed that she had no recollection of having been provided with the Costs Agreement at all.[118]
[117] ts 122.
[118] ts 102 - 103.
How much, if any, of Ms Wood's state of mind was evident to Mr Strbac at the time the Costs Agreement was signed is questionable, as he was not asked about it in evidence. However, as I have already indicated, Mr Strbac was at least aware that Ms Wood was highly dissatisfied with her former lawyers and still owed money to them.[119] That alone should have alerted Mr Strbac to Ms Wood's disadvantage, relative to him, in the context of costs disclosure.
[119] First Strbac Affidavit [7], [10].
Accordingly, while I have regard to the fact that verbal disclosure was provided in each case, I am not satisfied that it was capable of being an effective substitute, to any meaningful extent, for the written disclosure required by the LPA.
In Law Society of New South Wales v Foreman,[120] Mahoney JA made a number of observations as to a solicitor's fiduciary position in relation to their client, in a passage cited with approval by the Court of Appeal in Stevenson:
[A] solicitor is in a fiduciary position vis-à-vis her client and/or in a position of influence. She has therefore obligations to the client. Such obligations exist, in my opinion, not merely in the carrying out of an agreement already made between a solicitor and her client but also in respect of the making of it[.] … The content of such obligations, that is, what is necessary to be done in order to discharge them, varies with the circumstances of the particular case[.] … Such obligations ordinarily or at least frequently involve: that the client, because of independent advice or otherwise, be seen not to have entered into the agreement in reliance upon her relationship with or trust of the solicitor; that there be full and frank disclosure to the client of all information known to the solicitor which the client should know … and that if there be aspects of the contract in respect of which the solicitor may be in a position of advantage vis-à-vis the client, those matters be brought by her to the attention of the client so that the client can decide whether she should enter into the contract[.] …
The making of a special agreement in respect of costs is, in my opinion, essentially no different in principle from an agreement by the solicitor to sell property or services to her client. There are differences in the application of the relevant principles but, in general, the same considerations apply. Unless the circumstances otherwise indicate, it will be necessary to consider whether the client, in entering into the agreement, acted under the influence of the solicitor and whether, because of the considerations to which I have referred, the agreement should bind her.
… Costs agreements with the potential to involve the client in liability for amounts of this kind [$300,000 - $500,000] are agreements which require careful explanation to the client: their potential to do this is something which ordinarily should be brought clearly to the client's notice. But the present agreement apparently provided for the charging of costs on the basis of time spent. An agreement which so provides is apt to contain provisions which require special care. I shall refer to two matters which apparently assumed significance in the dispute … the power of the solicitor to engage and so to charge for other staff on a time basis; and the conflict of duty and interest which may arise under a costs agreement for costs on a time basis.
…
A costs agreement containing such a provision allows the solicitor to engage others to work in the litigation on a time basis and so to increase greatly the benefit to the solicitor and the burden on the client.… But ordinarily a power to engage others vests in the solicitor the power of increasing costs in circumstances which the solicitor is likely to understand and the client is less likely to be able to understand or to judge. If the power is exercised, for example, in the actual course of proceedings in court, the client may not be in a position to make a considered judgment of the need for the exercise of it or to resist it.
But, whatever be the position in relation to special provisions, a costs agreement which provides for charges on an hourly or similar basis is likely to involve a conflict between the solicitor's duty and his interest. Such an agreement ordinarily involves that the solicitor may determine how much time is to be spent on the client's litigation and by whom. It will therefore put the solicitor in a position in which her duty to her client (to do the work in such time that the costs will be no more than they need be) may be in conflict with her interest (that she receive more costs rather than less). The temptation may exist to spend upon the client's litigation time for which costs would not otherwise be billed or to engage on it staff whose time could or would not be used elsewhere in the firm. The law provides against not merely actual abuse, but the possibility of a solicitor preferring her interest to that of her client and the temptation to do it[.]
… But if costs agreements of this kind are to be obtained from clients, it is necessary that the solicitor obtaining them consider carefully her fiduciary and other duties, that she be conscious of the extent to which the agreements contain provisions which put her in a position of advantage and/or conflict of interest, and that she take care that, by explanation, independent advice or otherwise, the client exercises an independent and informed judgment in entering into them (emphasis added).[121]
[120] Law Society of New South Wales v Foreman (1994) 34 NSWLR 408, 435 - 437.
[121] Stevenson [239].
Those observations apply equally to a case where the costs agreement has the potential to involve a client in liability for an amount of more than $100,000.
In this case, apart from the potential for a conflict of interest, there were factors which highlighted the need for Mr Strbac to pay additional attention to meeting his fiduciary duty to Ms Wood. He was aware the matter was very complex. Further, to Mr Strbac's knowledge, Ms Wood had had two previous lawyers with whose representation she was very unhappy, and she was already liable for legal costs to her previous legal representatives which had not been paid.[122]
[122] First Strbac Affidavit [7], [10].
The Costs Agreement specified that fees would be determined only by applying the hourly rates to the units of time recorded by each staff member on the matter. The calculation of legal costs in such a manner means that the time recorded may not have even been time actually spent, having regard to the fact that time spent was rounded up, to be recorded in six-minute intervals only.
There is no evidence that any verbal explanation was given to Ms Wood as to the effect of the scale, the fact that the Costs Agreement removed the limits imposed by it, or that charging fees calculated on the third basis had the potential to be advantageous to Delta Legal when compared to the relevant determination.
As Ipp J observed in Brown:
[it is important] for solicitors, when entering into agreements with their clients whereby they seek to impose a costs regime different to that to which they in the ordinary course would be entitled, to ensure that there is no suggestion of any overreaching on their part.
In my opinion, any agreement which seeks to remove the limit imposed by the scale will be regarded as unreasonable if full disclosure is not made of the limits and benefits provided by the scale and the effect and consequences of the proposed agreement. The obligation to make a full and frank disclosure of this kind is an integral part of the duty owed by lawyers to their clients.[123]
[123] Brown (77).
Both parties submitted that, despite the fact that the LPA came into operation after Brown, the observations of Ipp J still represent the law in this State.[124]
[124] Plaintiff's supplementary written submissions [5] - [8]; Defendants' supplementary written submissions [3].
Delta Legal submitted that the third basis set out in the Costs Agreement was implemented on the basis that Mr Strbac's time was charged at a rate lower than he was entitled to charge.[125]
[125] First Strbac Affidavit [27]
Further, at the hearing of this matter, Delta Legal repeatedly submitted that the third basis of calculating its legal costs was lower than either the Supreme Court Determination or the Family Court Determination and thus could not be disadvantageous to Ms Wood.[126]
[126] First defendant's written submissions [21(a)(iii)]; [21(b)(ii)]; [21(c)(iii)].
Even if a lesser hourly rate was charged than that allowed by the relevant determination, I do not accept that Ms Wood was not, and could not have been, disadvantaged by the use of the third basis rather than the first.
As I have already pointed out, calculating fees in accordance with the third basis enabled Delta Legal to charge for time which it did not actually spend on the matter, by rounding up any time spent to multiples of six minutes. This was not possible under the first basis. Further, unlike the first basis, there is no acknowledgement in the third basis or on the invoices that any attention was to be, or was, directed to only charging for the reasonable amount of time required to be spent on a task.
In addition, the hourly rates outlined in the Costs Agreement were stated to apply on the basis of the person performing the task, not the nature of the task being performed. The potential for unfairness in the operation of the Costs Agreement as a result is obvious, and was highlighted in this case by the charging of fees for the use of the DMS. Given the invoices do not indicate who performed the work charged for, or the hourly rate which the work was charged, it is impossible to ascertain whether there was any discretion exercised in charging on the basis of the nature of the task performed. That impossibility in itself supports the proposition that the Costs Agreement is not fair or reasonable.
In my view, there was every prospect that a calculation of fees based on the third basis would result in fees greater than the fees to which Ms Wood would have been liable under the relevant determination.
Having regard to the potential conflict of interest which arose if Delta Legal were able to charge on the third basis, and the fiduciary relationship between it and Ms Wood, in my view it would have been appropriate for those matters to have been explained to Ms Wood as part of the costs disclosure. There is no evidence that was done.
The plaintiff submitted that the defendants had a fiduciary duty to provide estimates of costs for every procedural step in the proceedings, which the defendants failed to do.[127] I am unable to accept that submission. As I have already found, the defendants were not initially in a position to provide a well‑particularised estimate of costs. As time progressed, it was open to the defendants to provide a more accurate estimate. That could potentially have been done prior to August 2019, but it was not. However, it was made clear that, if the matter were to proceed to trial, the costs would be 'considerable', or words to that effect, and more than $100,000.
[127] Plaintiff's supplementary written submissions [8].
On the evidence, there was a discussion on 22 May 2019, about the conciliation conference, the costs incurred to date, and the likely costs if the matter did not resolve at the conciliation conference.[128] In these circumstances, in my view the specific failure to supply individual estimates for each procedural step did not of itself constitute a breach of the fiduciary duty owed to the plaintiff.
[128] First Strbac Affidavit, Annexure H.
The plaintiff also submitted that the defendants breached their fiduciary duty to the plaintiff by failing to advise the plaintiff to seek an order for security for costs on her behalf in the Family Court. However, the plaintiff did not identify any proper basis on which the defendants should have done so, and accordingly, I do not accept that submission.
Delay
There has been a significant delay on the part of the plaintiff in making this application. The Costs Agreement was terminated on 2 August 2019. This application was not made until 9 January 2024.
On 3 May 2023 the plaintiff's present legal representatives wrote to Mr Strbac regarding the removal of the caveats then lodged on the title of the Property. At that point, the plaintiff's lawyers wrote:
If you insist on payment of fees and/or disbursements billed and unpaid by Ms Wood please inform me of the amount claimed and send me all of the invoices from you or your practice to her.
If there is a dispute as regards unpaid monies my client will issue a Writ against Delta and you to have the costs agreement set aside and then tax the bills on scale.[129]
[129] Wood Affidavit, Annexure JLW-7.
Delta Legal responded on 12 May 2023, noting that the limitation period for taxation of costs had expired, at the latest, on 17 August 2021.[130]
[130] Wood Affidavit, Annexure JLW-9.
On 28 June 2023, the plaintiff's lawyers wrote to Delta Legal asking for copies of any costs disclosure and costs agreement.[131] No substantive response to that request was received. The Costs Agreement was not even produced when the plaintiff commenced proceedings for pre‑action discovery of it, on 15 November 2023. It was only on 12 December 2023, after Delta Legal commenced the GPC, that Costs Agreement was produced by way of discovery, in those proceedings.
[131] Wood Affidavit, Annexure JLW-10.
The delay by Delta Legal in producing a copy of the Costs Agreement on request by the plaintiff's solicitors was said to be on the basis that Delta Legal believed a copy had already been provided to Ms Wood in August 2020 and that it did not properly understand the issue which had arisen. Even so, it is difficult to understand why a law practice would decline to produce on request its Costs Agreement with a former client to another law practice now acting for that client, particularly when it has caveats on the title of a former client's property on the basis of it.
While the delay on the part of the plaintiff between May 2023 and January 2024 is explicable by reason of the refusal on the part of the defendants to provide a copy of the Costs Agreement, no explanation was given for the delay on the part of the plaintiff between August 2019 and May 2023. That delay is inordinate, and any prejudice to the defendants by reason of that delay is a factor which would weigh against setting aside the Costs Agreement.
As to the nature of any such prejudice, the defendants made no specific submission. However, the defendants were entitled to rely upon the sustained lack of action on the part of the plaintiff as indicating the acceptance of the amounts owing. While this is relevant, there is no fixed time frame under the LPA during which proceedings of this nature must be commenced.
The first defendant could argue that it has commenced the GPC, and those proceedings would be prejudiced if the Costs Agreement were set aside after such a delay. However, the first defendant took no action to recover its debt prior to these proceedings. That remained so even thought it was on notice as of May 2023 that the plaintiff was considering taking action to have the Costs Agreement set aside. Further, it was aware that the plaintiff required a copy of the Costs Agreement in order to determine her position. Notwithstanding this, the defendants continued to withhold a copy of the Costs Agreement from the plaintiff before commencing the GPC. In those circumstances, I am not satisfied that any prejudice which arises from the delay is of any significance
Conclusion
For the following reasons, I am satisfied that the Costs Agreement was not fair or reasonable:
(a)the failure on the part of the defendants to comply with the disclosure obligations of s 260(1) of the LPA;
(b)the fact that the failure to comply with s 260(1) included a failure to clearly disclose a matter of particular significance, namely the manner in which the plaintiff's legal costs were to be calculated;
(c)the fact that the failure to comply with s 260(1) of the LPA involved not only non-disclosure, but misleading disclosure, namely as to:
(i)the otherwise applicable determination; and
(ii)the prospect of recovery of costs in the event of either a successful or adverse outcome having regard to the jurisdiction in which the proceedings were being conducted;
(d)the lack of explanation on the part of the defendants as to the consequences of Ms Wood entering into a costs agreement which enabled legal costs to be charged other than according to scale, and particularly that that arrangement was likely to be disadvantageous to Ms Wood;
(e)the fact that Ms Wood was potentially vulnerable as a client seeking assistance in a complicated family law dispute, which must have been obvious to Mr Strbac, at least to some extent;
(f)the lack of information contained on the invoices, which meant that the plaintiff was unable to ascertain who performed the work charged for, how long it was said to have taken, or the hourly rate which had been applied to the work;
(g)the lack of regular invoicing between March 2019 and August 2019, notwithstanding that work was being regularly performed and billed during that period; and
(h)the lack of any other written update as to the plaintiff's legal costs during that period.
Accordingly, the Costs Agreement should be set aside.
The evidence available to me is not sufficient to enable me to make an order pursuant to s 288(5) of the LPA. Accordingly, the first defendant will need to re‑issue bills in accordance with the applicable scale, and if the plaintiff seeks a costs assessment, that can be done in the ordinary way.
Orders
(1)The Costs Agreement dated 27 September 2018 is set aside pursuant to s 288(2) of the Legal Profession Act 2008 (WA).
(2)The costs of the application be made payable by the defendants to the plaintiff, to be taxed if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SI
Associate to the Honourable Justice Forrester
18 JUNE 2024
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