Radich v Kenway[2014] QCA 301

SUPREME COURT OF QUEENSLAND

1. MARGARET McMURDO P:  This application for an extension of time to apply for leave to appeal should be refused with costs for the reasons given by Boddice J.

2. APPLEGARTH J:  I agree with the reasons of Boddice J and with the order proposed by his Honour.

3. BODDICE J:  The applicant seeks leave to appeal out of time a decision of the District Court of Queensland dismissing an appeal against a decision of the Magistrates Court of Queensland affirming a costs assessment in respect of two bills issued by the applicant to his then clients, the respondents.

4. At issue, should leave to appeal be given, is whether the District Court Judge correctly found the costs assessment complied with rule 720 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), and that the Magistrate properly confirmed the decision of the costs assessor, notwithstanding a breach of natural justice in the initial assessment, and the evidence of another costs assessor.

Background

5. The applicant was retained by the respondents to act in two separate proceedings in the District Court of Queensland. One proceeding related to an appeal in respect of a Gold Coast City Council prosecution against the respondents. The other related to a civil action against the respondents.

6. On 15 June 2010, the applicant issued two bills to the respondents. The first, in the amount of $19,005.37, related to the District Court appeal. The second, in the amount of $1,308.00, related to the District Court civil action. Allowing for a credit of $4,229.39 for payments already made by the respondents, the outstanding balance for both bills was $16,083.98. The respondents did not pay either bill.

7. On 2 August 2010, the applicant commenced proceedings against the respondents in the Magistrates Court in respect of the unpaid bills.  On 4 October 2010, an order was made, by consent, for the two bills to be assessed pursuant to section 335(1) of the Legal Profession Act 2007 (Qld) (“the LPA”).  Glenn Robert Walter (“Walter”) was appointed to carry out that assessment.

8. By letter dated 19 October 2010, Walter noted his appointment to assess both bills. He made directions for that assessment, including a timetable for the delivery of notices of objections or submissions by the respondents, submissions and other documentation by the applicant, submissions in reply and for submissions as to the costs of the assessment.

9. On 24 March 2011, Walter issued a certificate of assessment. He assessed the first bill at $10,302.74, and the second at $884.50. Allowing for the previous credit of $4,229.39, the balance in respect of both bills was $6,957.85. Walter’s fees for the assessment were $5,246.23. Walter determined the respondents’ solicitors’ costs of the assessment were $8,905.61.

10. The applicant requested reasons for the decision. Walter provided those reasons on 2 September 2011. He assessed his costs for the preparation of those reasons at $7,892.50. On 19 September 2011, the applicant applied to the Magistrates Court to set aside Walter’s certificate, including his decision to charge the applicant $7,892.50 in costs for the reasons.  The applicant contended if the application was successful the Magistrate should appoint a new costs assessor or, alternatively, review Walter’s decisions.  On 13 July 2012, the Magistrate dismissed the applicant’s application, and affirmed Walter’s decisions, as contained in the certificate.

11. By notice of appeal dated 18 August 2012, the applicant appealed the decision of the Magistrate to a District Court Judge. The grounds of appeal were, in summary, that the Magistrate had erred in not setting aside the whole of the costs assessor’s certificate, had erred in finding that Walter’s procedure on the assessment of costs was in accordance with the UCPR, had erred in not setting aside the certificate on the grounds Walter had breached the rules of natural justice, and had erred in undertaking an assessment of the items considered by Walter in breach of natural justice.  The applicant also contended the Magistrate had erred in making various findings in relation to Walter’s conduct of the assessment, and his conclusions.

12. At the hearing of the District Court appeal, the grounds of appeal were argued on the basis they fell into four distinct grounds:

1. Walter had failed to comply with UCPR, rule 720, in carrying out the costs assessment.

2. Walter had acted in breach of the UCPR by undertaking an assessment which was not confined by reference to the grounds of objection put forward by the respondents.

3. The Magistrate correctly concluded Walter had acted in breach of natural justice in considering items which had not been expressly objected to by the respondents, without giving the applicant the opportunity to be heard in relation to those matters but did not set aside the certificate, instead deciding those matters afresh.

4. The Magistrate erred in rejecting evidence tendered by the applicant.

District Court Judge’s findings

13. The District Court Judge found rule 720 of the UCPR required the procedure on assessment be appropriate to the amount in dispute.  The procedure adopted by Walter was appropriate, notwithstanding the costs of that assessment, having regard to the issues and the extent to which the dispute was pursued in submissions to Walter.  Where the client has sought an assessment of the whole of the solicitors’ bill, and that is ordered, the costs to be assessed in accordance with the procedure under the UCPR are the whole of the bill.

14. The District Court Judge further found that notwithstanding specific items being raised by the respondents, Walter’s obligation was to assess all of the costs in the two bills.  Further, as Walter found the applicant had failed to make proper disclosure in accordance with the LPA, it was necessary for Walter to assess all of the costs.

15. The District Court Judge found the Magistrate correctly concluded the process adopted by Walter, in relation to items which looked excessive but which had not been specifically addressed by the respondents, involved a breach of natural justice. However, the Magistrate appropriately dealt with this breach by assessing the items on the review. The applicant had the opportunity to make submissions to the Magistrate on that review.

16. The District Court Judge accepted it would have been open to the Magistrate to send the items back to Walter for reconsideration, to remit the items for reconsideration by a different costs assessor, or to have the entire assessment set aside. However, that would have been the most expensive response.  The assessment undertaken afresh by the Magistrate represented the most efficient and least expensive solution.  The Magistrate also correctly concluded Walter’s approach was not fundamentally flawed.

17. Finally, the District Court Judge found the Magistrate was entitled, in rejecting the evidence of a costs assessor tendered by the applicant, to take into account that that costs assessor had originally been retained to draw the bills.  The weight and significance to be attributed to that fact depended on the circumstances.  The Magistrate did not err in rejecting her opinion as to the appropriate conduct of the assessment.

Applicant’s submissions

18. The applicant submits an extension of time for leave to appeal ought to be given as the applicant erroneously believed the application for leave to appeal had been filed within time, and the application for an extension of time was filed shortly after the expiry of the time to apply for leave to appeal. There can be no prejudice in such circumstances. Further, the proposed appeal provides an excellent opportunity for a consideration of the costs assessment under the UCPR.

19. The applicant submits that regime requires any procedure adopted by the costs assessor to be appropriate having regard to the nature and scope of the dispute, the rules of natural justice and fairness and efficiency. The nature and scope of the dispute requires consideration of the grounds on which a party disputes the amount of the costs, and the liability to pay them. The dispute is determined by the contents of the affidavit specifying such grounds.

20. Walter, whilst specifying an appropriate procedure, failed to follow that procedure. Walter embarked on an assessment not limited to the matters raised by the respondents’ affidavit, entertained prolix and irrelevant submissions, and assessed items not the subject of objection without first hearing from the applicant. Such an assessment breached the requirements of rule 720 of the UCPR.  The procedure was not appropriate, having regard to the scope and nature of the dispute, was not in accordance with the rules of natural justice, and was not fair and efficient.

21. The applicant submits the District Court Judge’s finding the applicant had not objected to the process undertaken by Walter failed to have regard to the fact the assessment process specified by Walter at the commencement was not followed by Walter. As neither the applicant nor the respondents knew Walter was to undertake another process, there was no reason for the applicant to make an objection.

22. The applicant further submits the process adopted by Walter was not appropriate for the scope and nature of the dispute, having regard to the issues raised by the respondents in their affidavit setting out the grounds for disputing the bills. Walter also breached the rules of natural justice by assessing 47 items without either party having an opportunity to make submissions on those items. The Magistrate was in no better position to determine those items. No cure other than setting aside the initial assessment, and referring the bills to another costs assessor for assessment, could cure that breach of natural justice.

23. The applicant further submits the Primary Judge’s finding that no other process would have been less expensive overlooked the opinion expressed by the costs assessor retained by the applicant. That costs assessor did not opine the process had to comply with rule 722 of the UCPR.  The Primary Judge erred in finding that she did, and had no basis to reject her opinion.  The opinion expressed by the cost assessor was relevant evidence, and was not properly to be rejected on the basis of a lack of objectivity or independence.

Respondents’ submissions

24. The respondents submit the matters for consideration by Walter were not confined to matters raised by the respondents in their affidavit in dispute of the bills. The respondents’ application under section 335 of the LPA, and the order for assessment, was for an assessment of all the costs in both bills.  That defined the scope of the dispute.

25. Whilst the costs of the assessment were significant, the procedure adopted by Walter gave each party the opportunity to make written submissions on each bill. Each party was given an opportunity to be heard on costs. That was an orthodox approach, balancing the three criteria in UCPR, rule 720(2).  No other less expensive procedure could have been adopted particularly having regard to the claim the applicant had breached his disclosure obligations.

26. Whilst Walter breached the rules of natural justice, by not giving the applicant the opportunity to make submissions in respect of 47 specific items, the applicant invited the Magistrate, in the alternative, to decide the matters on the review, based on further submissions in respect of those claims. The Primary Judge correctly concluded this process overcame the initial breach of natural justice.

27. Finally, the respondents submit the District Court Judge correctly found it was open to the Magistrate to reject the evidence of the costs assessor retained by the applicant. Those conclusions were reasonably open, having regard to that costs assessor’s involvement in preparation of the original bills, and the benefit the Magistrate had of seeing the costs assessor give evidence.

Legislative scheme

28. Part 3.4 of the LPA imposes a legislative regime in relation to legal costs.  The purposes of that Part include providing for law practices to make relevant disclosures to clients regarding legal costs, and providing a mechanism for the assessment of legal costs.  Relevantly, a law practice has an obligation to disclose the basis upon which legal costs will be calculated, the client’s right to negotiate a costs agreement and to receive an itemised bill, and an estimate of the total legal costs if reasonably practicable or, if not, a range of estimates of those total legal costs.  A failure to disclose to a client, in accordance with its obligations, may result in the client being relieved of the obligation to pay the law practice’s costs, unless those costs have been assessed under Division 7 of Part 3.4 of the LPA.^[1]

29. The assessment of costs is regulated by Division 7 of Part 3.4 of the LPA.  Relevantly, a client may apply for an assessment of the whole or any part of its legal costs, even if the costs have been wholly or partly paid.^[2]  In conducting a costs assessment, the costs assessor must consider whether or not it was reasonable to carry out the work to which the legal costs relate, whether or not the work was carried out in a reasonable way, and the fairness and reasonableness of the amount of legal costs in relation to the work.^[3]

30. In considering what is a fair and reasonable amount of legal costs, the costs assessor may have regard to a number of matters, including any disclosures made by the law practice, the retainer, the complexity, novelty and difficulty of the matter, the quality of the work, and the time within which the work was required to be done.^[4]  The costs assessor must also decide the costs of the cost assessment.^[5]  Unless the cost assessor otherwise orders, the law practice must pay the costs of the assessment, except in specified circumstances.^[6]

31. The process of undertaking an assessment is specified in Part 4 of Chapter 17A of the UCPR.  The application for assessment is to be accompanied by an affidavit stating whether the applicant disputes or requires assessment of all or what part of the costs, and the grounds on which the applicant disputes the amount of costs or liability to pay them.^[7]  It is for the costs assessor to determine the procedure to be followed on the assessment.^[8]  The procedure adopted must be appropriate to the scope and nature of the dispute and the amount in dispute, be consistent with the rules of natural justice, and be fair and efficient.^[9]

Discussion

32. In their amended application in the Magistrates’ Court, the respondents sought orders that “the legal costs issued by the plaintiff [in the two bills] be assessed pursuant to s 335(1) of the Legal Profession Act 2007”.  The grounds on which the respondents disputed the costs, as set out in the accompanying affidavit, included the applicant’s failure to provide disclosure as required by sections 308 and 309 of the LPA.

33. By consent order dated 4 October 2010, the Magistrates Court ordered the legal costs in the two bills be assessed, and appointed Walter to carry out that costs assessment.  Walter, by letter dated 19 October 2010, made directions to facilitate the conduct of the assessment.  That process was consistent with UCPR, rule 720(1), which provides for the assessor to determine the process for the assessment.

34. The directions made by Walter included a timetable for the delivery of notices of objection or submissions by the respondents, and for submissions in response by the applicant.  These directions were consistent with the requirements of UCPR, rule 720(2).  They provided for a process which was fair and efficient, having regard to the nature and scope of the dispute which related to the whole of the bills, in the context of an alleged failure to satisfy the disclosure obligations in the LPA.  The provision for submissions, including in reply, met the obligation to act in accordance with the rules of natural justice.

35. By letter dated 30 December 2010, Walter determined the applicant had failed to comply with his disclosure obligations. It was significant non-compliance. That finding properly raised for consideration the fairness and reasonableness of the amount of the legal costs, as Walter was permitted to reduce the amount of costs claimed by an amount proportionate to the seriousness of the failure to disclose. This necessitated consideration of all of the items in the bills.

36. Walter’s consideration of items in the bill other than those specifically raised by the respondents, did not constitute a breach of his obligations under UCPR, rule 720.  Where a client is seeking an assessment of the whole of the bills, and that is ordered, all of the costs are to be assessed as they are the costs in dispute for the purposes of the UCPR.  The assessment is not restricted to only those items specifically raised by the client.  However, that assessment must be conducted fairly and efficiently, and in accordance with the rules of natural justice.

37. A consideration of all items was also necessary having regard to the conclusion that there had been non-compliance with the disclosure obligations. All of the costs had to be assessed, if the applicant was to recover any costs from those bills. The respondents did not need to pay any of the legal costs, unless they had been assessed under Division 7.^[10]

38. These conclusions are consistent with the three requirements in UCPR, rule 720(2).  Those requirements ensure any assessment is conducted fairly and efficiently having regard to the nature and scope of the dispute.  Where the dispute requires an assessment of the whole of the bill, the further requirement that the process accords with the rules of natural justice ensures there is no unfairness in the assessor undertaking a consideration of items not specifically raised by the client in the affidavit in dispute.  Compliance with the rules of natural justice will necessitate the costs assessor giving the law practice the opportunity to make submissions on any other items of concern.

39. In undertaking the assessment, Walter made findings in relation to the reasonableness of items about which the applicant had been given no opportunity to make submissions. To that extent, the process actually adopted by Walter did not comply with UPCR, rule 720, as it was in breach of the rules of natural justice.  However, that non-compliance was the subject of specific submissions before the Magistrate on review, including an alternate submission the Magistrate review those items.

40. The process undertaken by the Magistrate involved giving the applicant an opportunity to make submissions in respect of each of the items considered by Walter, in breach of the rules of natural justice. The applicant took advantage of that opportunity. The Magistrate reached a determination having considered those further submissions. This process was fair and efficient, having regard to the nature and scope of the items in dispute. It also satisfied the requirements for the rules of natural justice.

41. Whilst the applicant contended the breach of natural justice was of such a magnitude that it infected the whole of Walter’s assessment, it was open to the District Court Judge to conclude it was not necessary for the Magistrate to set aside the assessment as a whole, particularly having regard to Walter’s finding the applicant had breached in a significant way his obligation of disclosure under the LPA.  The fair and efficient course was for the Magistrate to review those matters, with the benefit of appropriate submissions.  As the Primary Judge observed:^[11]

“The Magistrate, by conducting the assessment in respect of those items afresh, himself adopted the most efficient and least expensive solution.  It is somewhat surprising to find the appellant before me complaining about the excessive cost of the process of costs assessment, and then asking me to deal with the difficulties created by setting aside the assessment and ordering it to be done again before a different costs assessor, who would presumably impose much the same charge.  There is no reason why it would not take that cost assessor about the same time.”

42. The District Court Judge correctly observed the applicant had sought the Magistrate undertake the review, in the alternative to, a reassessment.  This alternate submission meant the District Court Judge was not in error when observing “No case was mounted before the Magistrate that a breach of natural justice had to lead to a reassessment”.^[12]  The alternate submission implicitly conceded a review was an available option, notwithstanding the applicant’s primary contention for the whole of the assessment to be set aside by reason of Walter’s breach of the rules of natural justice.

43. The District Court Judge also correctly observed that the mere fact the costs of the assessment exceeded the amount being assessed did not mean the result must be wrong. Regard must be had to the nature and scope of the dispute. Where, as here, a central issue in the dispute is whether the legal practitioner has complied with the disclosure obligations, the assessment of the issues in dispute is likely to involve considerable expense.

44. Finally, the District Court Judge correctly found it was a matter for the Magistrate whether he accepted or rejected the evidence of the costs assessor, tendered on behalf of the applicant. That costs assessor had been retained by the applicant to prepare the itemised bills which were the subject of the assessment. Those matters were relevant to any assessment of her objectivity and independence. What weight and significance was to be attributed to those matters was ultimately a matter for the Magistrate, and the District Court Judge on appeal.

Conclusion

45. The applicant has not demonstrated any error by the District Court Judge in dismissing the appeal from the review undertaken by the Magistrate. Whilst the requirements of UCPR, rule 720(2) were not met in the initial costs assessment, by reason of Walter’s failure to comply with the rules of natural justice, the process adopted by the Magistrate to undertake the assessment himself was the most fair and efficient in the circumstances, having regard to the nature and scope of the dispute, and overcame that breach of the rules of natural justice.

46. There was no error on the part of the District Court Judge in concluding the breach of natural justice did not infect the whole of the assessment such as to justify setting it aside and remitting it afresh, either to Walter or to a new costs assessor.  That would not have been fair and efficient in all of the circumstances, particularly having regard to the finding of a significant breach of the applicant’s disclosure obligations.

47. Once that conclusion is reached there is no reason, in the interests of justice, why the applicant ought to be given leave to appeal out of time. Any grant of leave would result in the appeal being dismissed.

Orders

48. I would refuse the application for an extension of time to apply for leave to appeal, with costs.