Yang v Stephen Paul Firth trading as Firths the Compensation Lawyers
[2013] NSWSC 676
•30 May 2013
Supreme Court
New South Wales
Medium Neutral Citation: Yang v Stephen Paul Firth trading as Firths The Compensation Lawyers [2013] NSWSC 676 Hearing dates: 13 April 2012, 18 April 2012, 2 August 2012, 3 August 2012 Decision date: 30 May 2013 Jurisdiction: Common Law Before: Hall J Decision: (1)An order pursuant to s 728(1)(a) of the Legal Profession Act 2004 that the defendant give to the plaintiff a Bill of Costs in itemised form in respect of the legal services provided by the defendant to the plaintiff in connection with the plaintiff's claim for work injury damages.
(2)Direct that unless submissions are lodged within 21 days of the date of judgment in support of a specific order on costs, the order of the Court will be that the defendant pay the plaintiff's costs on the ordinary basis.
Catchwords: COSTS - SOLICITOR - application under s 728(1)(a) of the Legal Profession Act 2004 (the Act) - whether power to order itemised bill of costs where refusal by legal practitioner to comply with request pursuant to s 332A of the Act - whether expiry of limitation period to apply for costs assessment under s 350 of the Act precludes order under s 728 being made - circumstances that may arise by reason of s 350 do not act as preclusion but may constitute relevant discretionary factors - whether accord and satisfaction precludes client from seeking itemised bill of costs - no statutory warrant to limit the power of the Court to make a s 728 order where costs have been paid in whole or in part by a client - whether proceedings an abuse of process - finding of an abuse of process requires cogent evidence before an adverse finding can be made - no evidence available to demonstrate that plaintiff had no genuine interest in the proceedings - abuse of process not established - no facts or matters that, as a matter of discretion, would require refusal of the order sought under s 728(1)(a) Legislation Cited: Legal Profession Act 1987
Legal Profession Act 2004
Legal Profession Regulation
Uniform Civil Procedure RulesCases Cited: Batistatos v Roads & Traffic Authority of New South Wales (2006) 226 CLR 256
Bechara v Atie [2005] NSWCA 269
Briginshaw v Briginshaw (1938) 60 CLR 336
Brown v Firth [2013] NSWSC 677
Dale v Firth (Supreme Court of NSW, McCallum J, 31 January 2012, unreported)
Estate of Allwood v Benjafield [2009] NSWSC 1383
Goldsmith v Sperrings Ltd [1977] 1 WLR 478
Michael Wilson & Partners Limited v Nicholls [2011] HCA 48
Parramatta River Lodge Pty Ltd v Sunman (1991) 5BPR 12,038
Re Majory [1955] Ch 600
Ridgeway v The Queen (1995) 184 CLR 19
Rural and General Insurance v Goldsmiths Lawyers [2012] NSWSC 358
Williams v Spautz (1992) 174 CLR 509Category: Principal judgment Parties: Da Guo Yang (Plaintiff)
Stephen Paul Firth trading as
Firths The Compensation Lawyers (Defendant)Representation: Counsel:
M Einfeld QC; P Bolster (Plaintiff)
R Stitt QC; R Goodridge (Defendant)
Solicitors:
Barton Lawyers (Plaintiff)
Firths the Compensation Lawyers (Defendant)
File Number(s): 2012/82142
Judgment
The defendant is a sole practitioner and proprietor of Firths The Compensation Lawyers (Firths) and was previously retained by the plaintiff, Da Guo Yang, in respect of a work injury damages claim arising from an injury he sustained in an accident at work on 13 February 2007.
Proceedings in Brown v Firth [2013] NSWSC 677 were listed for hearing before me along with proceedings in the present matter. On an intermediate date, 2 August 2012, Mr Einfeld QC, counsel for both plaintiffs suggested as a possible course that I treat the evidence and submissions in these proceedings as evidence and submissions in the proceedings brought by Mr Brown. There being no objection to that course, the evidence received at the hearing was admitted in both proceedings.
However, the proceedings in each case involve different factual matters or events. Accordingly, there is a separate judgment given in each case.
The plaintiff commenced proceedings by Summons filed 14 March 2012 seeking the following orders:
(1) An order pursuant to s 728(1)(a) of the Legal Profession Act 2004 (the LPA) that the defendant give to the plaintiff a Bill of Costs in itemised form in respect of the legal services provided by the defendant to the plaintiff in connection with the plaintiff's claim for work injury damages.
(2) An order that the defendant produce to the plaintiff's legal representative the plaintiff's file relating to the conduct of the plaintiff's work injury damages claim including the cost[s] agreement dated 10 January 2012.
(3) The defendant pay the plaintiff's costs of and incidental to this Summons on an indemnity basis.
(4) Such further orders as this Honourable Court should think fit.
At hearing, Mr Einfeld did not press Order 2 as the plaintiff's file and the costs agreement have been produced to his current solicitors.
An affidavit in support of the Summons sworn on 13 March 2011 (presumably 2012) by Tony Bakarat, the plaintiff's solicitor, was filed on 14 March 2012 but was not read.
Similarly, an affidavit sworn on 23 March 2012 by the defendant and filed on 26 March 2012 was not read. The defendant formed the view that he did not have anything to respond to given that the plaintiff did not read any affidavits.
At this point it is sufficient to note that s 728 is to be found in Chapter 8 of the LPA which is entitled "General Provisions". Section 350, which is discussed below, is to be found in Part 3.2 of the LPA which is concerned with costs disclosures and assessments and in particular is a provision that authorises a client to apply to the Manager, Costs Assessment for an assessment of legal costs. However, where an application is made out of time (which may well arise in this case) then an application for assessment may only be made if this Court determines that it is just and fair for the application for assessment to be dealt with after the 12 month period.
Factual Background
A Notice to Admit Facts and Authenticity of Documents dated 28 March 2012 was tendered by the plaintiff and admitted without objection. The plaintiff also tendered the defendant's response disputing the Notice dated 30 March 2012 which was also admitted without objection. It contained one factual dispute which the plaintiff subsequently conceded to. These two documents contain most of the factual background to these proceedings which is as follows.
On 10 June 2010, the plaintiff signed a costs agreement with the defendant by his employed solicitor, Mr Greg McKean (Costs Agreement), in relation to a work injury damages claim. Mr McKean had carriage of the plaintiff's matter.
On 8 October 2010, the defendant, by his then employed solicitors Ms Hong Liu and Mr McKean, settled the plaintiff's claim for $100,000 inclusive of costs.
On 29 October 2010, the defendant wrote to the plaintiff confirming the settlement.
On 18 November 2010, the defendant received a cheque in payment of ninety per cent of the plaintiff's settlement proceeds.
On 18 November 2010, the defendant banked the settlement proceeds of $90,000 into his trust account.
On 23 November 2010, the defendant sent a memorandum of costs and disbursements to the plaintiff. The memorandum attached a Trust Account Statement, an Authority to Pay, an Authority to Transfer and a computer generated Trust Account Statement dated 23 November 2010. It is accepted by both parties that this memorandum was a lump sum bill within the meaning of s 302 of the LPA.
On 24 November 2010, the plaintiff signed the Authority to Pay and the Authority to Transfer.
On 26 November 2010, the defendant, pursuant to the plaintiff's Authority to Transfer, transferred from his trust account to his general account a sum sufficient to reduce the account to nil in accordance with the memorandum dated 23 November 2010.
On 26 November 2010, the defendant, pursuant to the plaintiff's Authority to Pay, transferred $48,149.70 from his trust account to the plaintiff.
On 17 December 2010, the defendant sent a cheque to the plaintiff for the sum of $5,500, being an amount which had been retained in his trust account for payment of the plaintiff's former solicitors' fees which had subsequently been waived.
On 17 February 2012, Barton Lawyers wrote to the defendant advising that they acted for the plaintiff, requesting the plaintiff's file and enclosing an Authority signed by the plaintiff on 16 February 2012.
The letter of request also stated "I also request a bill in itemised form within 21 days pursuant to s 332A of the Legal Profession Act 2004". The letter referred to the judgment in Dale v Firth (Supreme Court of NSW, McCallum J, 31 January 2012, unreported). The letter then stated "I trust that it will not be necessary for me to make an application to the Supreme Court of NSW under s 728 of the Legal Profession Act 2004".
On 27 February 2012, Barton Lawyers wrote to the defendant and repeated the request for the plaintiff's file and an itemised bill.
On 28 February 2012, the defendant advised Barton Lawyers that the file was in storage and a fee was required to handle and retrieve it. The defendant also stated:
"In relation to your request for an itemised bill we draw your attention [to] the fact that it is now well over 12 months since we accounted to your client and therefore unless and until an extension of time is granted by the Supreme Court your client is out of time to apply for an assessment. In those circumstances we cannot see how there can be any obligation for the preparation of a bill in itemised form."
On 2 March 2012, Barton Lawyers renewed the request for an itemised bill and requested a copy of the Costs Agreement. The letter also noted:
"... Section 332A of the Legal Profession Act 2004 does not impose a time limit to my client's right to request a bill in itemised form. The 12 month time limit to file an application for assessment is a provision independent of the right to request an itemised bill."
On 12 March 2012, the defendant forwarded a copy of the Costs Agreement and again referred to the expiry of the 12 month time limit in which to make an application for a costs assessment and stated:
"Despite this your client requests an itemised bill. The preparation of a solicitor/client bill is an expensive and time consuming process. To enable us to consider the matter further please advise the purpose of the request."
On 14 March 2012, the Summons in the present proceedings was filed.
On 16 March 2012, Barton Lawyers replied to the defendant and stated, inter alia:
"I note your request for advice as to the purpose of my client's request for an itemised bill. This is not a relevant issue. My client is simply requesting the itemised bill as he is legally entitled to pursuant to section 332A of the Legal Profession Act."
The Evidence
The evidence before the Court in this case is somewhat unusual in light of a number of aspects. First, the plaintiff chose not to give any evidence. Second, an affidavit in support of the Summons sworn on 13 March 2011 (presumably 2012) by the plaintiff's solicitor, Mr Tony Bakarat, was filed but not read. Third, an affidavit sworn by the defendant on 23 March 2012 was filed but subsequently not read.
The plaintiff primarily relied upon the Notice to Admit Facts and Authenticity of Documents and the defendant's Response to establish the factual background of the matter as discussed above.
It should be noted that other documents, however, were tendered and admitted in these proceedings by both parties that relate to other matters which I will discuss later in this judgment.
Legislative Scheme
Part 3.2 of Chapter 3 of the LPA provides a statutory scheme for the disclosure and assessment of legal costs and regulates the billing of costs for legal services in New South Wales.
Section 301 sets out the purposes of Part 3.2 as follows:
301 Purposes
The purposes of this Part are as follows:
(a) to provide for law practices to make disclosures to clients regarding legal costs,
(b) to regulate the making of costs agreements in respect of legal services, including conditional costs agreements,
(c) to regulate the billing of costs for legal services,
(d) to provide a mechanism for the assessment of legal costs and the setting aside of certain costs agreements.
Section 302 contains the definitions that apply in Part 3.2 and relevantly provides:
bill means a bill of costs for providing legal services.
itemised bill means a bill that specifies in detail how the legal costs are made up in a way that would allow them to be assessed under Division 11.
lump sum bill means a bill that describes the legal services to which it relates and specifies the total amount of the legal costs.
Sections 332 and 332A are part of Division 7 of Part 3.2 which is concerned with Billing. Those sections relevantly provide:
332 Bills
(1) A bill may be in the form of a lump sum bill or an itemised bill.
...
332A Request for itemised bill
(1) If a bill is given by a law practice in the form of a lump sum bill, any person who is entitled to apply for an assessment of the legal costs to which the bill relates may request the law practice to give the person an itemised bill.
(2) The law practice must comply with the request within 21 days after the date on which the request is made.
(3) If the person making the request is liable to pay only a part of the legal costs to which the bill relates, the request for an itemised bill may only be made in relation to those costs that the person is liable to pay.
(4) Subject to subsection (5), a law practice must not commence legal proceedings to recover legal costs from a person who has been given a lump sum bill until at least 30 days after the date on which the person is given the bill.
(5) If the person makes a request for an itemised bill in accordance with this section, the law practice must not commence legal proceedings to recover the legal costs from the person until at least 30 days after complying with the request.
(6) A law practice is not entitled to charge a person for the preparation of an itemised bill requested under this section.
(7) Section 332 (2), (5) and (6) apply to the giving of an itemised bill under this section.
Section 328 is part of Division 5 of Part 3.2 which is concerned with Costs Agreements. The section provides that on application by a client, a costs agreement may be set aside by a costs assessor if the costs assessor is satisfied that the agreement is not fair and reasonable. Subsection 328(2) provides the following criteria to be applied in determining the fairness and reasonableness of a costs agreement:
(2) In determining whether or not a costs agreement is fair or reasonable, and without limiting the matters to which the costs assessor can have regard, the costs assessor 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,
(b) whether any Australian legal practitioner or Australian-registered foreign lawyer acting on behalf of the law practice has been found guilty of unsatisfactory professional conduct or professional misconduct in relation to the provision of legal services to which the agreement relates,
(c) whether the law practice 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.
There is no express provision as to the time limit for making an application under s 328.
Section 350 is part of Division 11 of Part 3.2 which is concerned with Costs Assessments. The section relevantly provides:
350 Application by client or third party payers for costs assessment
(1) A client may apply to the Manager, Costs Assessment for an assessment of the whole or any part of legal costs.
(2) A third party payer may apply to a costs assessor for an assessment of the whole or any part of legal costs payable by the third party payer.
(3) An application for a costs assessment may be made even if the legal costs have been wholly or partly paid.
(3A) If any legal costs have been paid without a bill, the client or third party payer may nevertheless apply for a costs assessment.
(4) An application by a client or third party payer for a costs assessment under this section must be made within 12 months after:
(a) the bill was given or the request for payment was made to the client or third party payer, or
(b) the costs were paid if neither a bill was given nor a request was made.
(5) However, an application that is made out of time, otherwise than by:
(a) a sophisticated client, or
(b) a third party payer who would be a sophisticated client if the third party payer were a client of the law practice concerned,
may be dealt with by the costs assessor if the Supreme Court, on application by the costs assessor or the client or third party payer who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12-month period.
...
Section 728 is part of Chapter 8 of the LPA which is entitled "General Provisions". The section relevantly provides:
728 Supreme Court may order delivery up of documents etc
(1) On the application of a client of a law practice, the Supreme Court may order the law practice:
(a) to give to the client a bill of costs in respect of any legal services provided by the law practice, and
(b) to give to the client, on such conditions as the Supreme Court may determine, such of the client's documents as are held by the law practice in relation to those services.
(2) Subsection (1) does not affect the provisions of Division 11 of Part 3.2 with respect to the assessment of costs.
...
Legal Principles
This Court has both an inherent and statutory power to order a legal practitioner to give to a client or former client a bill of costs: Parramatta River Lodge Pty Ltd v Sunman (1991) 5BPR 12,038 at 12,040; Estate of Allwood v Benjafield [2009] NSWSC 1383 at [38].
There is no inconsistency between the inherent power and the legislative scheme, to the contrary, the statutory power is, "to precisely the same effect" as the inherent power: Allwood, supra, at [38] referring to s 209C of the Legal Profession Act 1987 (the 1987 Act), the predecessor to s 728 of the LPA.
The power under s 728(1)(a) and its predecessor has been understood to be the power to order an itemised bill of costs: Rural and General Insurance v Goldsmiths Lawyers [2012] NSWSC 358. In Parramatta River Lodge, supra, a case concerning provisions governing costs assessments in the 1987 Act, Young J observed:
"it must be remembered that the whole purpose of the provisions in Division 5 of Pt 11 are to give the person liable to pay the bill sufficient information to decide whether or not he or she will pay the bill or refer it for taxation. Accordingly, the law, either in legislation or by the use of the inherent power of the Court, has always required there to be a detailed statement from the solicitor both as to costs and disbursements. The authorities show that unless there is such a detailed statement, what is provided by the solicitor is not to be regarded as a bill of costs within the meaning of the Division. This is so even though some of the cases which have been decided thereby throw considerable hardship on a solicitor in having to set out and prepare a bill years after he or she has done the work." (at 12,041).
His Honour, after referring to a number of cases in which the purpose of a bill of costs was considered, concluded that:
"The whole tone of most of the cases has been that a solicitor is the officer of the court and, no matter how inconvenient it might be, the Court expects that in accordance with the highest standard of the profession the solicitor will give a fully detailed list of charges to the person liable to pay the bill and if asked will submit the bill for moderation by an officer of the Court." (at 12,046).
The Court's power to order the delivery of an itemised bill of costs was considered in Dale v Firth (Supreme Court of NSW, McCallum J, 31 January 2012, unreported) which concerned an application by that plaintiff seeking, inter alia, similar orders under s 728 of the LPA as in the present matter.
In that case, a request had been made by the plaintiff pursuant to s 332A to the defendant, a legal practitioner (and also the defendant in this case), for an itemised bill in relation to a work injury claim that the defendant had acted in on behalf of the plaintiff. The defendant did not satisfy the request.
McCallum J noted that the information sought by the plaintiff was relevant to a remedy that he may wish to pursue under s 328 of the LPA, which provides a mechanism for a client to seek to have a costs agreement set aside by the costs assessor. A costs assessor may do so if satisfied that the costs agreement is not fair and reasonable. A relevant factor for the plaintiff to consider before making such an application to the costs assessor would be what work was in fact undertaken by the defendant: at [13].
McCallum J also observed that s 350 of the LPA provided an avenue for the plaintiff to seek an assessment of costs and s 361 provided that a costs assessor must assess the amount of any disputed costs by reference to the costs agreement (provided that the agreement has not been set aside under s 328). Her Honour then concluded that:
"... it is plainly important for the plaintiff to have some mechanism for enforcing his entitlement under s 332A for an itemised bill." (at [15]).
Her Honour, in rejecting a submission that the Court does not have power under s 728 to order a practitioner give an itemised bill that has not been provided in response to a request under s 332A, concluded that the legislature intended by the very inclusion of the power under s 728 that the Court would have the power to grant a variety of remedies including the specific remedy sought by the plaintiff (at [17]). This was consistent with the remedial and protective objects of the LPA and accordingly, the order sought by the plaintiff was granted.
The power to order a Bill of Costs under s 728 is discretionary and the discretionary factors will depend upon the facts and circumstances of each case.
Whilst there are no fixed or closed categories of factors that are relevant in determining the exercise of the discretionary power under s 728, it is possible to envisage that there may be circumstances established in the evidence that may warrant a refusal of an order. These would include circumstances:
(1) Where there is no utility in the making of such an order;
(2) Where there exists good grounds for the refusal of such an order including matters such as the amount of costs, the time and cost to the defendant in complying with an order and/or the extent of delay in initiating proceedings for an order.
Submissions
Statutory construction of Part 3.2 and s 728
In the written submissions for the plaintiff, it was contended that Dale v Firth, supra, provides authority for the proposition that s 728 provides a remedy in the event that a law practice fails to comply with a request made under s 332A. It was noted that neither ss 728 nor 332A require an application or request pursuant to those sections to be made within any time limits.
It was submitted that there had been a clear failure by the defendant to comply with the request made by the plaintiff's solicitors on 17 February 2012 and that no legitimate reason had been given for that failure. The defendant's response, it was submitted, ignored the fact that there are "legitimate forensic purposes" for the plaintiff to obtain an itemised bill of costs, namely so that he can consider:
(a) whether to proceed with an application for leave to proceed with an assessment under s 350(5) of the LPA;
(b) whether to pursue any remedy under s 328 of the LPA in the context of that assessment.
Attention was drawn to the language of s 332A(1) which, it was submitted, "clearly embraces a client with an entitlement to apply for leave under s 350(5)": Written Submissions for the plaintiff at [27]. It was further contended that the effectiveness of an application by the plaintiff for leave to this Court under s 350(5) would be dependant on the benefit of an itemised bill being provided under s 332A.
Section 350(5), as extracted above at [37], provides that an application for a costs assessment made out of the 12 month time limit by a client may still be dealt with by a costs assessor if this Court determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application to be dealt with out of time.
In the written submissions for the defendant, it was contended that the requirement that leave to this Court be sought under s 350(5) operated as a qualification to s 332A. It was necessary for such qualification to operate, so the submission went, in order to prevent an inordinate and disproportionate obligation being placed on legal practitioners to prepare, without remuneration, an itemised bill within 21 days of a request whether or not:
"(a) the work was performed 2 years before, 10 years before or 60 years before;
(b) the file has been handed over to the client or another lawyer;
(c) the file has been subpoenaed or destroyed;
(d) the work had been the subject of a previous costs assessment;
(e) the costs have been subject to previous dispute and settlement;
(f) whether or not the client has any remedy available in respect of the itemised bill; and/or
(g) whether or not the client is merely being mischievous, vexatious or merely curious." (Written Submissions for the defendant at [2.15])
The defendant's submissions also drew attention to ss 309, 332 and 333 of the LPA which set out a number of matters in relation to the issuing of bills including, inter alia, that it must be disclosed that a client may request an itemised bill (s 309) and that the LPA provides three avenues that a client may pursue in the event there is a dispute in relation to legal costs (s 333). Regulation 111A of the Legal Profession Regulation, it was noted, prescribes the detail and form of the notification of a client's rights that must be provided to a client under s 333. The prescribed form is a fact sheet which includes the following statement:
"You have 12 months from the bill being given to you (or a request for payment being made, or when you paid the costs) to apply for costs assessment. The Supreme Court of NSW will only grant extensions of time in special circumstances." (original emphasis).
The submission was that where ss 309, 332 and 333 are complied with, a client's action in making or not making a request for a costs assessment under s 350 are actions taken in the context of an informed decision.
It was submitted that the form of s 350(5) operates in a manner similar to a statute of limitations and that satisfying a Court that a limitation period should be extended was quite a different exercise of discretion from satisfying a Court that a procedural default should be excused. A number of general principles governing discretionary considerations concerning applications for extension of time were extracted at [2.27] of the defendant's written submissions. The submissions also outlined a number of cases which considered whether to grant an extension of time pursuant to s 350(5).
The defendant distinguished the decision in Dale v Firth, supra, from the present matter, submitting that in that case at the time the plaintiff made a request under s 332A and an application pursuant to s 728, the 12 month time limit in which to seek an assessment of costs under s 350 had not yet expired (as it has in the subject proceedings). The submission also contended that to the extent that McCallum J's dicta supported the proposition that s 332A should be read without qualification, the dicta was wrong.
The submission was that the Court should only exercise the power under s 728 where such a course was in the interests of justice and on conditions which protect the interests of a solicitor (Bechara v Atie [2005] NSWCA 269 at [5]). It was contended that approaching s 728 as a de facto alternative to the statutory scheme in Part 3.2 operates with neither of those two preconditions in place. A solicitor's contractual and commercial interests were said to be limited by the restrictions contained in Part 3.2 and it would not be practical, fair or sensible for an order under s 728 to alter that position: Written Submissions for the defendant at [2.46]-[2.49].
A further submission was made to the effect that the terms of s 728(2) expressly excluded the provisions of Division 11 of Part 3.2 with respect to the assessment of costs (s 350 falls within Division 11).
In written submissions in reply, supplemented by oral submissions, Mr Einfeld noted that s 728(2) stipulates that s 728(1) does not affect Division 11 of Part 3.2, that is, the power by the Court to order the delivery of a bill does not limit, nor is it limited by, the provisions relating to assessment of costs contained in Division 11 of Part 3.2.
Mr Einfeld also referred to the language of s 332A(2) which, it was submitted, "requires" a law practice to provide an itemised bill upon the request of a client who has received a lump sum bill. Further, it was stated that s 332A does not provide to the solicitor any discretion so as to weigh the request having regard to merit considerations.
The submission was that the 12 month time limit under s 350 is only imposed upon an application for a costs assessment, and does not govern the obligations in s 332A; even then, the 12 month period is capable of extension if the matters identified in s 350(5) are established upon an appropriate application to this Court. It was noted that the present proceedings were not an application under s 350(5) and therefore the defendant's references to authorities concerning the granting of extensions of time were not relevant.
There was a further submission that the requirement in s 350(4)(a) that the application for a costs assessment be made within 12 months after "the bill was given" must be a reference to an "itemised" bill given that the regime contained in Division 11 of Part 3.2 reflects the legislature's intention that a client receive from a solicitor a detailed bill of costs if sought, in order that a considered decision be made as to whether to seek an assessment of costs or seek to have a costs agreement set aside.
Accord and satisfaction
The defendant also submitted that the legislative scheme envisages a power for the parties to reach an accord in respect of costs. Aside from the provisions regarding costs agreements, it was contended that s 367(4), in allowing a costs assessor to determine that the amount of fair and reasonable costs is the amount agreed to by the parties if during the course of the assessment the parties notify the costs assessor that they have agreed on the amount of those costs, was another mechanism to reach accord.
It was stated in written submissions that if accord and satisfaction was not a defence (or some other ground disentitling a client from requesting an itemised bill) then every costs order or agreement could be the subject of a request for an itemised bill.
In submissions in reply and in oral submissions, Mr Einfeld for the plaintiff noted that s 350(3) expressly preserved the entitlement to apply for a costs assessment where costs have already been paid. The submission was that given the right to assessment is preserved so must the right to request an itemised bill in order to make an informed decision as to whether to seek assessment.
At this point, I observe that s 728 is not directly or indirectly concerned with the question as to whether costs have or have not been paid. Indeed, in considering the submission on behalf of the defendant in relation to accord and satisfaction, having regard to the payment of costs by the plaintiff in the present case, s 350(3) makes it plain that whole or part payment of costs is not an impediment to an application for a costs assessment. There is, in my view, no statutory warrant to limit the power of the Court to make a s 728 order where costs have been paid in whole or in part by a client.
Abuse of process
The defendant at the hearing of the present application sought to adduce and rely upon evidence for the purposes of mounting a submission that the application under s 728 in effect constituted an abuse of process and therefore orders sought ought not to be made. The case the defendant sought to make out in this respect sought, amongst other things, to establish that in truth the application was made for an extraneous or improper purpose, in particular that the true purpose of the application was to harass Mr Firth rather than as a genuine pursuit of the plaintiff's statutory rights to an order for the provision of an itemised bill of costs under s 728. Insofar as this involved an attack upon Mr Bakarat as the solicitor on the record, it is clear from well established principles that a finding of an abuse of process in the manner referred to above requires cogent evidence before an adverse finding may be made against the plaintiff's solicitor: Briginshaw v Briginshaw (1938) 60 CLR 336.
On the first day of hearing, a preliminary issue regarding subpoenas for production served by the defendant on the proprietor of Legal Costs Investigations Pty Ltd (LCI) and Mr Michael Du Chateau, a director of LCI, had regrettably yet to be resolved. The subpoenas were returnable on the first day of hearing at 9.00 am. Documents had not been produced in accordance with the subpoenas and there was no appearance by the subpoenaed parties until 2.00 pm that day. The subpoenas were formally called upon and consequently, the plaintiff sought to file in Court a Notice of Motion dated 5 April 2012 seeking orders to set aside the subpoenas. The Notice was attached to a letter from Barton Lawyers to the defendant dated 5 April 2012 which was tendered and admitted without objection. The response by the defendant dated 11 April 2012 was also tendered and admitted without objection.
A letter was produced by Mr Du Chateau which indicated that there were no documents that answered or fell within the terms of the subpoena. An application was made and granted to Mr Stitt QC, counsel for the defendant to formally examine Mr Du Chateau on oath.
It was against this background that Mr Stitt first raised the issue of abuse of process through his explanation as to the purpose of the documents sought. Mr Stitt referred to LCI's website which offers to provide legal services to persons who wish to sue the defendant's firm, Firths.
By way of background, reference was also made by Mr Stitt to the fact that Mr Barakat is a former partner of Keddies, a law firm and that Mr Barakat, together with other former partners of Keddies have been sued by the defendant in respect of approximately 100 matters where the defendant commenced proceedings on behalf of former clients of Keddies to recover monies allegedly overcharged. The contention was that the present application by the plaintiff is:
"simply an abuse of process to harass Firth and to try and swing the pendulum back in favour of Barakat and the other Keddies partners." (T 13 April 2012 at 3.48).
It was submitted that the purpose of the subpoenas was:
"to make good a submission that these proceedings, where people are being urged to... contact Legal Costs Investigations, who will then commence proceedings to seek itemised bills of costs from Firths and they are simply harassing and causing Firths difficulty, time and cost." (T 13 April 2012 at 4.4).
The following documents were then tendered by the defendant in support of that contention:
(a) Australian Securities and Investments Commission (ASIC) Current and Historical Company Extract of LCI dated 30 March 2012;
(b) A print out of a Google website search of the words "legal costs investigations";
(c) A print out from a webpage of LCI with the heading "Complaints Against Lawyers? Hire Legal CI";
(d) A print out from a webpage of LCI with the heading "Is Your Lawyer Overcharging You?"; and
(e) A print out of a Google website search of the words "lci firths" and a webpage of LCI with the heading "Firths Lawyers - Legal Investigation Services".
On the first day I raised with Mr Stitt the question as to whether the defendant considered the need for a substantive application should he wish to contend that the plaintiff's proceedings involved an abuse of process. Such an application may then satisfy the interests of procedural fairness with the plaintiff being given the opportunity of contesting any allegation of abuse of proceedings. The proceedings were then adjourned until a further date.
On the next occasion, Mr Stitt reiterated the defendant's claim that the proceedings were an abuse of process. However no formal application for a stay or dismissal of the proceedings was made.
Further documents were tendered to support the abuse of process claim and were admitted subject to objections reserved by Mr Einfeld.
(f) Administrative Decisions Tribunal in Legal Services Commissioner v Roulstone [2011] NSWADT 269;
(g) Land and Property Information search of XX XXX St Redfern Sydney;
(h) A print out of a Google Map webpage and aerial photograph of XX XXX St Redfern Sydney;
(i) Photograph of doorway with number XX above it;
(j) A print out from a webpage of Legal Costs Auditors Pty Ltd (LCA) with the heading "Why would you question Firths' fees?";
(k) ASIC Current and Historical Company Extract of LCA dated 17 April 2012;
(l) A print out of NSW Office of Fair Trading Business Name Registration details of Barton Lawyers.
The defendant also sought and was granted leave to issue subpoenas for production to Mr Barakat, Karen Margaret Barakat (Mr Barakat's wife) and LCA. The purpose for seeking these documents was in similar terms to that concerning documents subpoenaed from LCI and Mr Du Chateau.
On the next day of hearing, the following documents were tendered by the defendant and admitted:
(m) A print out from a webpage of LCA with the heading "Why would you question Firths' fees?" (being in similar form to the first page of the document at [78](j));
(n) An email dated 20 March 2012 from Mr Mike Vander Heijden to Mr Bakarat re: LCA website (admitted subject to relevance).
The defendant's submission was that the documents tendered indicated that an animus existed against the defendant by Mr Barakat and that the plaintiff's present application to the Court was being used by Mr Barakat to harass the defendant. In the event that the Court rejected the defendant's submissions as to the proper statutory construction of the relevant provisions of the LPA, this animus, it was contended, is a factor that would weigh in favour of the Court not exercising its discretion to make an order under s 728.
These documents were said to demonstrate the following matters:
(1) Mr Du Chateau, a person who is not a legal practitioner, offers legal services to persons who wish to sue the defendant through the LCI website;
(2) The LCI and LCA websites have been set up exclusively to attack the defendant in respect of the issues of legal costs and overcharging;
(3) LCI uses internet advertising to promote its services which includes featuring the URL link entitled "Firths Lawyers Review" on Google searches;
(4) LCI and LCA, as detailed on their respective websites, directly appeal to former clients of Firths to engage each respective company to investigate any potential overcharging for legal costs on their behalf;
(5) Mr Barakat "is behind" LCI and LCA; it was submitted that:
(i) Mr Bakarat, Mr Du Chateau and LCI all carry on business at the same address (being an address connected to Keddies);
(ii) Mr Du Chateau is a "front" for Mr Barakat given that he does not have legal qualifications. The service offered by him and his company is related to suing lawyers, namely Firths;
(iii) Mr Barakat is a director of LCA; and
(iv) Mr Barakat's wife, Mrs Barakat is the sole shareholder of LCA.
In written submissions, Mr Stitt, citing Michael Wilson & Partners Limited v Nicholls [2011] HCA 48 at [89], stated that the present proceedings are an abuse because (1) the Court's procedures are invoked for an illegitimate purpose; (2) the use of the Court's procedures is unjustifiably oppressive to the defendant and (3) the use of the Court's procedures would bring the administration of justice into disrepute: Defendant's Supplemental Submissions at [4.7]-[4.8]. It was submitted on behalf of the defendant that it had established that Mr Barakat seeks to discredit, harm and harass him. It was contended that:
"[Such an] inference is available, particularly in the circumstances where no evidence has been given by either plaintiff and neither plaintiff was subjected to cross-examination that the plaintiffs have been enticed or provoked into the applications with Mr Barakat being the relevant agent provocateur... malice may be inferred." (Defendant's Supplemental Submissions at [4.8])
Mr Stitt also addressed in his oral submissions the absence of any evidence from the plaintiff, with the result that there was no evidence before the Court regarding the circumstances in which the transactions occurred between solicitor and client nor evidence as to what the plaintiff knew or understood about relevant transactions, in particular, the contract of retainer or the ultimate resolution of the plaintiff's work injury damages claim: T 2 August 2012 at 16.18. The decision not to adduce evidence from the plaintiff was a "deliberate ploy" and was an "obviously deliberate forensic decision": T 2 August 2012 at 16.27.
It was also contended that a decision was made not to read the affidavit of Mr Barakat after notice had been given that he would be required for cross-examination. It was noted that the matters that Mr Stitt wished to cross-examine on included Mr Barakat's role and function in the creation of the LCI website as well as a contention that he organised persons such as the plaintiff to commence proceedings against the defendant (T 13 April 2012 at 5.20).
At this point it should be noted that aside from the matters raised in light of the evidence (or lack of evidence) referred to at [82]-[84], no other specific references to the evidence were made by the defendant to support the submission that there has been an abuse of process involved in the present proceedings.
On the issue of the asserted abuse of process, the plaintiff tendered the following documents which were admitted subject to relevance:
(a) Letter from the defendant to Barton Lawyers dated 21 May 2012;
(b) A print out from a webpage of LCI with the heading "Keddies Lawyers Overcharging Explained";
(c) An email from Mr Du Chateau to Mr Grant Merriel dated 2 February 2012; and
(d) An email from Mr Vander Heijden to Mr Du Chateau dated 30 April 2012
In reply submissions, Mr Einfeld on behalf of the plaintiff submitted that while an abuse of process may be found where the use of a Court's procedures was unjustifiably oppressive on a party, in circumstances where the defendant has not deposed to any difficulty in satisfying any order that the Court may make, no such oppression had been demonstrated. Reference was made to evidence of a letter from the defendant to Barton Lawyers dated 21 May 2012 indicating that the defendant was in possession of the plaintiff's file.
In relation to the defendant's submission that the proceedings were instituted for an improper or illegitimate purpose, the following matters were noted in the plaintiff's Written Concluding Submissions (at [11]):
(1) An allegation of abuse of process is a serious matter and the defendant needed to show that the predominant purpose of the plaintiff in commencing proceedings has been one "other than that for which it was designed"; in this respect, the defendant had to discharge a "heavy" burden of proof: Williams v Spautz (1992) 174 CLR 509 at 529;
(2) The subpoenas for production of documents to Mr Du Chateau, LCI, Mr and Mrs Bakarat and LCA had not produced any documents to suggest that the plaintiff commenced proceedings for the purpose of harassing the defendant;
(3) The documents tendered by the defendant, in particular the correspondence, ASIC searches, website extracts and photographs may establish that there is a connection between Mr Barakat and Mr Du Chateau, however, that evidence cannot impugn the motive or purpose for which the proceedings were brought by the plaintiff.
It was noted that the documents tendered by the plaintiff in reply from LCI's website and from the file produced by Mr Du Chateau demonstrated his interest in investigating overcharging by the firm Keddies as well as by Firths. These documents were said to show that the services provided by Mr Du Chateau and LCI had a wider scope and were not exclusively targeted at the defendant;
(4) The plaintiff bears no legal or evidentiary onus to rebut the defendant's allegations of abuse of process.
Consideration
Statutory construction of Part 3.2 and s 728
The LPA is a statutory scheme that is intended to regulate the conduct of legal practitioners and to protect their clients and the public generally from the risks that may arise from engaging in litigation, including in particular, unexpected or excessive legal costs.
Part 3.2 of the LPA includes provisions to ensure that clients understand the nature and quantum of legal costs that they may be required to pay as well as mechanisms to facilitate the resolution of disputes about legal costs.
I have considered the provisions within Part 3.2 and in particular those contained in ss 328, 332A and 350. Section 332 allows for a law practice to provide a client with a lump sum bill. There is no dispute in this matter that the defendant provided a lump sum bill in giving the plaintiff the memorandum of costs and disbursements on 23 November 2010.
The plaintiff, as he was entitled to do, requested on 17 February 2012 an itemised bill which according to s 332A, a law practice "must comply" with in 21 days. The defendant has failed to do so.
The definition of an itemised bill pursuant to s 302 directly elucidates the relationship between an itemised bill and costs assessments by providing that the form of an itemised bill is detailed in a way that would allow the legal costs to be assessed under Division 11. A detailed break down of legal costs in an itemised bill provides relevant information as to how the matter progressed over time and, plainly, exactly what work was undertaken by the law practice.
I accept the plaintiff's submission that there are "legitimate forensic purposes" for the plaintiff to obtain an itemised bill given that the LPA expressly provides two mechanisms under ss 350 and 328 for a client to have, respectively, legal costs or a costs agreement reviewed by a costs assessor. An itemised bill is required in order for a client to make a considered decision as to whether to pursue those remedies by, inter alia, shedding light on the merits of any application that may be made to the costs assessor.
I note the significance placed by the defendant on the limitation period provided for in s 350(4) and the requirement for leave of the Court to dispense with that limitation period under s 350(5). However, in my view, the submission by the defendant that the plaintiff is immediately precluded from his right to obtain an itemised bill under s 332A because the limitation period to make an application for a costs assessment has expired must be rejected.
The defendant identified circumstances (extracted above at [54]) said to indicate that that preclusion exists. However such circumstances, for example, where the file has been destroyed or where the work was performed over many years before the request, may be regarded as discretionary factors that a Court would consider when determining whether to make an order under s 728.
I respectfully agree with the finding by McCallum J in Dale v Firth, supra, that s 728 is, quite necessarily, a mechanism in the LPA to make available a number of remedies to parties and specifically, to remedy a refusal by a legal practitioner to comply with a request under s 332A. It is the discretionary nature of the power of the Court to make an order under s 728 that acts as the qualification to s 332A (rather than s 350) and ensures that a legal practitioner is not unduly prejudiced or oppressed.
The defendant also placed significant reliance on the way in which the Court has determined applications under s 350(5), submitting that this should inform the determination under s 728. An application under s 728 is not merely an application under a separate provision under the LPA but it is in fact a different application in substance to one that is made under s 350(5). A s 728 application may be considered a step necessarily taken in order to make an application under s 350(5). However, the existence of s 350(5) does not mean that in determining whether to make an order under s 728 the Court must also determine, on a prima facie or final basis, that a client will be able to satisfy the Court in the manner prescribed in s 350(5) for an extension of time. At most, where in some cases it appears on a s 728 application that particular considerations under s350(5) may well arise, that may be a relevant matter in the exercise of the discretion under s 728. However, the evidence in the present case can not and has not demonstrated any such relevant considerations. As a matter of discretion, in this case, s 350(5) does not in my opinion stand in the way of the plaintiff's pursuit of the orders sought.
Accord and satisfaction
As I have noted above at [68], there is no statutory warrant to limit the power of the Court to make a s 728 order where costs have been paid by a client. In that respect, the defendant's submission that the plaintiff is disentitled from receiving an itemised bill because he has paid the legal costs must be rejected. The circumstance identified by the defendant in written submissions at [2.44], namely, an undue burden upon a solicitor in complying with s 332A (such as where costs have been paid by a client, banked and declared for taxation purposes by a solicitor), are again discretionary factors that may be considered by a Court in making a determination under s 728.
Abuse of process
As earlier noted, despite the claim that the proceedings were an abuse of process on the part of the plaintiff's solicitor, the defendant chose not to make a formal application for a stay or dismissal of the proceedings. Instead, Mr Stitt submitted that the abuse of process claim should be considered as part of the discretionary exercise in determining whether to make the orders sought.
It is appropriate at this point to refer to abuse of process principles. What amounts to an abuse of court process cannot be formulated in terms of closed categorises: Batistatos v Roads & Traffic Authority of New South Wales (2006) 226 CLR 256 at [9]. However the concept has been extended to proceedings "instituted for an improper purpose", "that are seriously and unfairly burdensome, prejudicial or damaging" or "productive of serious and unjustified trouble": Ridgeway v The Queen (1995) 184 CLR 19 at 74-75. It would include circumstances where the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed: Re Majory [1955] Ch 600 at 623-624, or some collateral advantage beyond what the law offers: Goldsmith v Sperrings Ltd [1977] 1 WLR 478 at 498-499.
The onus of proof of establishing an abuse of process unsurprisingly lies upon the party alleging it: Williams v Spautz, supra, at 529. In applying the standard of proof I have regard to the observations of Dixon J in Briginshaw v Briginshaw, supra, at 362:
"The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences."
In determining questions of abuse of process the nature and quality of the evidence relied upon, that is its probative value, must be scrutinised with some care. In the present case the defendant's allegations and contentions are made against a solicitor acting for a party to proceedings (the plaintiff). Cogent evidence, in my opinion, is required before it would be open to a Court to conclude that a solicitor on the record is acting for his own (or another party's) purposes and that the client, the party to the proceedings, has no genuine interest in the proceedings. Whatever the circumstances by which Mr Yang came to retain Mr Barakat, there is evidence that a retainer exists (the Authority signed by Mr Yang to transfer and forward his file to Barton Lawyers at p 28 of the Notice to Admit Facts and Authenticity of Documents).
The documents tendered in evidence by the defendant are said to evidence an attempt by Mr Barakat to attract or solicit former clients of the defendant and to encourage them to obtain advice and commence proceedings in relation to costs paid. Even if it is accepted that the particular documents evidence such conduct, it does not follow that the plaintiff in the present case does not himself have a real or genuine interest in investigating the costs charged by and paid to the defendant by means of the orders sought in the Summons.
The documents tendered in evidence indicate that entities allegedly connected to Mr Barakat (being Mr Du Chateau and LCI) have sought to attract former clients of another law firm, namely, Keddies. Those documents, being a website extract and emails between Mr Du Chateau and a business consultancy (referred to above at [87](b)-(d)) provide the basis for an inference that the defendant is not being exclusively "targeted". In addition, the fact that those entities have chosen to market their services towards an audience that may have concerns about being overcharged by former legal practitioners is not in itself conduct constituting an abuse of process.
Furthermore, there is considerable doubt as to whether the defendant has sufficiently demonstrated through the evidence tendered that Mr Barakat is in some way improperly carrying on activities with LCI and/or Mr Du Chateau. At its highest, the documents tendered demonstrate that they share an address of business but this does not provide any further insight into Mr Barakat's actions or motives in these proceedings.
As to the relationship between Mr Barakat and LCA, while the evidence shows that Mr Barakat is a director of that company, this does not, without more, disclose or provide the basis for an inference that there is some impropriety in the commencement of these proceedings. The offer of services by a company such as LCA or a solicitor such as Mr Barakat concerned with the investigation of potential overcharging by legal practitioners is not per se an illegitimate commercial pursuit.
The failure to read the affidavit of Mr Bakarat and the absence of evidence from the plaintiff are not matters that translate into evidence that the proceedings were not genuinely brought by Mr Yang. In that respect, as earlier noted, there is evidence that Mr Yang has retained Barton Lawyers. This is not a case where there is no evidence of a retainer between solicitor and client.
Conclusions
On the basis discussed above I have concluded that the power under s 728 to order a legal practitioner to comply with a request by a client for an itemised bill of costs under s 332A is available and, as a matter of discretion should be exercised in favour of the plaintiff.
In determining whether to exercise the discretion under s 728 I have taken into account the plaintiff's reasons for requiring an itemised bill, noting that its provision would assist him in considering whether to pursue remedies available in Part 3.2 of the LPA. I have had regard to the defendant's allegation that the proceedings have been an abuse of process, and for the reasons set out above, I have concluded that no such abuse has been established. There are no facts or matters that as a matter of discretion would require refusal of the order sought under s 728(1)(a).
Costs
On the question of costs, the costs follow the event rule would apply: UCPR 42.1. On that basis costs of these proceedings would be ordered in favour of the plaintiff against the defendant on the ordinary basis: UCPR 42.2. I note that the plaintiff has applied for indemnity costs but without detailed submissions in support of such an order. Unless either party wishes to heard on the question of costs and makes application in that respect within 21 days of the date of this judgment, the order made in accordance with UCPR 42.1 and 42.2 will be the order of the Court in the proceedings.
Orders
I make the following orders:
(1) An order pursuant to s 728(1)(a) of the Legal Profession Act 2004 that the defendant give to the plaintiff a Bill of Costs in itemised form in respect of the legal services provided by the defendant to the plaintiff in connection with the plaintiff's claim for work injury damages.
(2) Direct that unless submissions are lodged within 21 days of the date of judgment in support of a specific order on costs, the order of the Court will be that the defendant pay the plaintiff's costs on the ordinary basis.
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Decision last updated: 31 May 2013
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