Winn v Boss Lawyers Pty Ltd[2018] QCAT 233

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

1. [1]
   The applicant (a barrister) retained the respondent legal firm to prepare for a federal court procedural hearing in QUD 1092 (an application to discontinue her own appeal) and QUD 1102 (a challenge to the competency of the same appeal) listed for 23 March 2016.
2. [2]
   A client agreement was prepared on 15 March 2016 specifying the scope of works as “preparation of a brief to counsel to appear at the hearing on 23 March 2016, attend at the hearing to instruct, or on any interlocutory proceeding”.
3. [3]
   Based on 5 minute units for work to be performed by Mark Harley, a senior partner (at $440 per hour) and an employed lawyer Luke Walker (at $300 per hour) the respondent estimated fees and costs at $10,000 - $60,000 (depending on exigencies).
4. [4]
   A costs disclosure statement and the client agreement were sent to the applicant as an offer to enter into a costs agreement. She was asked to sign the draft and deposit $10,000 into the respondent’s trust account to cover preparation and appearance and briefing counsel. The applicant did not sign the costs agreement but transferred $5,000 for preparation and outlays but not enough to cover the costs of the hearing on 23 March 2016. Acceptance of the stated terms of the costs agreement is implied.
5. [5]
   The respondent worked on the file from 11, 13 and 15-22 March 2016 including compiling a brief to counsel but withdrew on the morning of 23 March 2016 (for alleged client breach) leaving the applicant self-representing. As it transpired QUD 1092 and 1102 were both dismissed with costs. Propositions advanced by the applicant at the proceeding were rejected by the judge as “contorted to the point of nonsense”^[1] and a submission made by the applicant as one that could “best be described as her clutching at straws to avoid the usual consequence of an application being dismissed.”^[2]
6. [6]
   The applicant was later billed $14,013.20 for professional services including $888.36 for photocopying negotiations, $225.00 for Mr Walker’s brief court appearance on the 23^rd and approximately $1859.17 for reviewing emails to and from counsel and settling his brief.
7. [7]
   The applicant does not deny a retainer for work up to 23 March 2016 “as per the respondent’s letter of 15 march 2016” but denies liability for “prospective” work that “was not instructed or on foot”.
8. [8]
   She seeks to have the costs agreement set aside for failure to fulfil a condition that a nominated experienced lawyer do the work personally, negligently incurring liability for additional court costs, briefing counsel without instructions and a billing nearly 3 times the agreed figure.

The statute and principles

9. [9]
   Costs agreements are regulated by Division 5 of the Legal Profession Act 2007 (Qld) (LPA). Section 326 provides that, subject to that division and Division 7, “a costs agreement may be enforced in the same way as any other contract.” Section 328(1) provides that the Supreme Court or the tribunal may order that a costs agreement be set aside “if satisfied the agreement is not fair and reasonable”.
10. [10]
    Section 328(4) provides that “[i]f the Supreme Court or tribunal orders a costs agreement be set aside, it may make an order as it considers appropriate in relation to the payment of legal costs the subject of the agreement”.
11. [11]
    The tribunal has no costs assessing role unless it sets aside a costs agreement.^[3]
12. [12]
    Fairness means fairness according to law and depends on the circumstances surrounding the formation of the agreement^[4] and the way it was obtained.^[5]
13. [13]
    Reasonableness is objective. The test is whether the “potential outworking” or practical effect of the terms of the costs agreement would be accepted by the independent observer.^[6]
14. [14]
    As with any discretion the validity of its exercise is measured against the purposes, scope and text of the conferring statute. As the applicant rightly points out the LPA is concerned mainly with consumer protections and maintaining professional standards and public confidence.
15. [15]
    Where, as here, there is no finding of unsatisfactory professional conduct or professional misconduct made, matters which may be taken into account in deciding if a costs agreement is fair or reasonable include whether the law practice failed to make any of the disclosures required under Division 3, and the circumstances and conduct of the parties before, when, and after the agreement was made.^[7] Prevailing industry standards can also be relevant.
16. [16]
    The consent of the client to pay fixed costs or costs calculated at an agreed rate must be real consent, obtained without undue influence or pressure and on full disclosure^[8] which is an ongoing obligation.^[9]
17. [17]
    Disclosure of matters required under Division 3 has been said to lie “at the heart of making a valid and enforceable costs agreement with a client”.^[10]
18. [18]
    Detailed costs disclosure duties are set out in s 308 LPA. They include:

• the basis of calculation;
• client rights including to progress reports, itemised accounts and notice of any substantial changes;
• an overall estimate, or, if not practicable, a range and an explanation of the major variables;
• billing intervals; and
• interest rates on overdue amounts.

19. [19]
    Disclosure must be made in writing before the law practice is retained, expressed in plain language and, if needs be, explained orally in a way likely to be understood.^[11]
20. [20]
    The purpose of the disclosure requirements according to Senior Member Smithers in Simitzis v Slater and Gordon^[12] is:

… to provide assistance and protection to consumers of legal services. It is to ensure they are given as much information as practicable, as soon as practicable, in order to be able to make an informed choice as to how to conduct their legal business. A vital aspect of this is what will their legal costs be? And they need this information as early as possible in order to make strategic decisions about how, and whether, to proceed with litigation, and how much emphasis to give to seeking to settle proceedings. That is why the Act requires that an estimate of total legal costs be provided, or a range of estimates of total legal costs, as soon as practicable, and preferably before solicitors are retained. A client’s interests could be prejudiced by a delay in provision of this information. Clients are frequently concerned that costs they pay at an early stage of a retainer might turn out to be ‘thrown away’ if they subsequently decide, upon receiving full information as to the estimated total costs, that commercially, it is not in their best interests to continue to fight the case. The obligation to give ongoing disclosure exists for the same reason.

21. [21]
    As Fraser JA explained in Connollys Lawyers Pty Ltd v Davis^[13] in the event of inadequate disclosure, in addition to applying under s 328, the client need not pay the legal costs and the practice may not maintain (recovery) proceedings unless they have been assessed under Division 7.
22. [22]
    On an assessment of legal costs under Division 7 the assessor must assess costs by reference to the provisions of any applicable costs agreement if it has not been set aside under s 328 unless satisfied that (amongst other things) “the costs agreement does not comply in a material respect with any disclosure requirements of division 3…” in which case the costs payable “may be reduced by an amount considered by the costs assessor to be proportionate to the seriousness of the failure to disclose.”^[14]
23. [23]
    However, non-disclosure does not automatically render a costs agreement invalid. Its effect has to be judged in light of the parties’ overall experience and conduct.^[15]
24. [24]
    As both fairness and unreasonableness are determined at the time the costs agreement was made, not as performed,^[16] what work is done and how it was performed go more to the question of assessment than validity.  So do the advertised specialties of a practice and the skill levels of its representatives. 
25. [25]
    The respondent contends in final submissions filed 11 January 2018 that the applicant has failed to establish any ground for setting aside the costs agreement and at [3] argues that in commencing the (magistrates court) proceeding seeking assessment of the costs after having launched this proceeding and continuing to prosecute she “…reveals that her real complaints are as to the provision of the services pursuant to the costs agreement^[17]and not as to the formation or the terms and practical operation of the costs agreement.” Her application should be dismissed with costs.
26. [26]
    It asserts that, for the most part, the grounds advanced by the applicant (even if factually correct) relate to the performance of the services pursuant to the costs agreement. To the extent that the factual contentions which underpin the grounds rely on the applicant’s credit, they should be rejected.
27. [27]
    The triable issue is whether the applicant has made out a prima facie case of unfairness or unreasonableness.^[18] If there is, the persuasive onus shifts to the respondent.

The grounds of the application

28. [28]
    The allegations grounding the application as filed are that:

1. The costs agreement (Attachment 1) was breached:

1. (a)
   The litigation required, and Mark Harley was retained on the condition, that the work would be done by him as an experienced solicitor. That did not occur.
2. (b)
   Mr Harley failed to prepare for and to appear at the hearing on 23 March 2016, or to take the steps that could have achieved the applicant’s instructed termination of the applications, before the hearing so the hearing did not have to proceed.
3. (c)
   Mr Harley’s bill is for work as preparation for the hearing and to negotiate with Leigh’s solicitor, Rodgers Barnes Green, for consent orders for termination of QUD 1092 and QUD 1102, which was negligent – unnecessary and of no use – when QUD 1092 and QUD 1102 had never been served ...

2. Mr Harley misrepresented that:

1. (a)
   he could advise and do the work competently;
2. (b)
   he would personally undertake the work;
3. (c)
   he would appear at the hearing on 23 March 2016;
4. (d)
   his costs up to and including the hearing on 23 March 2016 were $5000.

3. Boss Lawyers increased their agreed costs of $5000 for work to and including the hearing on 23 March 2016 to $14,013.20:

1. (a)
   without disclosure of that increase;

2. (b)
   without disclosure of the reason for such increase;

3. (c)
   without there being any reason for such increase;

4. (d)
   when the application could have been resolved for the mere cost of filing Notices of Withdrawal of QUD 1092 and QUD 1102;

5. (e)
   when Mr Harley failed to appear at the hearing on 23 March 2016;

6. (f)
   without disclosure of the costs being for work of a novice solicitor, Luke Walker;

7. (g)
   including costs a solicitor is not entitled to charge inter alia;

(i) conferences with and reviewing work of novice solicitor;

(ii) reading rules and legislation;

(iii) briefing counsel without and contrary to instruction;

(iv) photocopying of documents the applicant had photocopied and supplied;

(v) $750 to cease to act.

4. Boss Lawyers billed for work that was:

1. (a)
   not necessary as QUD1092 and QUD1102 had not been served;

2. (b)
   not done (eg prepare submissions for hearing on 23 March 2016);

3. (c)
   not done to reasonable standard (eg inaccurate brief to counsel);

4. (d)
   done without instruction (eg brief to Matthew Jones);

5. (e)
   done contrary to instruction (eg brief to Matthew Jones);

6. (f)
   in negligent failure:

(i) to determine that QUD 1092 and QUD 1102 had not been served;

(ii) to take action in regard to the failure of the respondent Leigh’s solicitors, Rodgers Barnes Green, to disclose to the Court and Boss Lawyers that the applications QUD 1092 and QUD 1102 had not been served;

(iii) to protect the applicant’s interests when the applications were not served;

(iv) to inform the Court prior to hearing on 23 March 2016, or to appear on 23 March 2016 to inform the Court, that the applications had not been served;

(v) to file notices of withdrawal of the applications before 23 March 2016.

5. Their Tax Invoice (Attachment 2):

1. (a)
   is gross overcharging;

2. (b)
   bills for items that a solicitor is not entitled to charge for;

3. (c)
   is, without notice, three times as much as the cost agreement, $14,013.20;

4. (d)
   fails to take into account that Mr Harley breached the retainer and caused the two applications to be dismissed with costs.

6. Mr Harley submitted to the Court an affidavit sworn on 22 March 2016 of his reason for ceasing to act. The reason stated that the applicant “had enlarged [his] firm’s scope of works” is plainly untrue. In fact, Mr Harley’s work was reduced in scope on discovery that the Notice of Objection to Competency was incompetent and would have been significantly reduced in scope with reasonable competence in determining that QUD 1092 and QUD 1102 had not been served and by filing Notices of Withdrawal in both.

7. Mr Harley acted without instruction inter alia brief to counsel, letter to Associate seeking adjournment to unspecified date, draft consent orders sent to [the opposing party’s solicitors] Rodgers Barnes Green.

8. Mr Harley failed to follow instructions and acted contrary to instructions inter alia sent brief to Matthew Jones, failed to determine date service of applications, terms of orders by consent.

9. Mr Harley misinformed and failed to inform the applicant of his actions inter alia details of his correspondence with Rodgers Barnes Green regarding consent orders, his preparations of submissions.

10. As a result of negligent failure to properly conduct the matter according to the agreement and instruction, and failure to determine and to inform the Court that QUD 1092 and QUD 1102 had not been served, QUD 1092 and QUD 1102 were dismissed with costs.

11. Boss Lawyers’ ceasing to act at the hearing on 23 March 2016 caused the applications to be dismissed when they could have been withdrawn under Federal Court Rules without adverse costs and with minimal client costs. The dismissals resulted in two costs orders against the applicant and irreparable damage to the applicant’s related appeal.

12. Boss Lawyers failed to do any work that was of use or benefit to the applicant. They unnecessarily incurred their own excessive costs by negligent conduct of the matter. Their negligence has resulted in the application losing the right to appeal (causing significant financial loss) and has caused serious financial damage (of adverse costs) to her in QUD 1092 and QUD 1102.

29. [29]
    In amended grounds dated 26 September 2016 the applicant abandoned any reimbursement for court costs and raised new allegations about an oral discussion overriding the terms of the written costs agreement claiming at [1]-[23]:

1. The costs agreement (Attachment 1) was breached:

1. (a)
   The litigation required, and Mark Harley was retained on the condition, that the work would be done by him as an experienced solicitor. That did not occur.

To secure the retainer, Mr Harley represented in telephone conversations with the applicant on 11 and 15 March 2016 that he had the ability to perform the work as he had previous employment and relevant experience at Cowen and Tucker Lawyers and would undertake the matter as he understood the importance of the matter to enable the applicant finally to have application for annulment heard. The applicant specifically stated that she did not want a junior solicitor handling the matter as that was the reason the matter was poorly conducted to that date. However, after being retained, Mr Harley did not personally undertake the work.

Further, My Harley misled the applicant before obtaining funds from the applicant.

Further, Mr Harley did not at any time inform the applicant that Luke Walker, an inexperienced solicitor, had conduct of the matter.

2. (b)
   Mr Harley failed to prepare for and to appear at the hearing on 23 March 2016, or to take the steps that could have achieved the applicant’s instructed termination of the applications, before the hearing so the hearing did not have to proceed.
3. (c)
   Mr Harley’s bill is for work as preparation for the hearing and to negotiate with Leigh’s solicitor, Rodgers Barnes Green, for consent orders for termination of QUD 1092 and QUD 1102, which was negligent – unnecessary and of no use – when QUD 1092 and QUD 1102 had never been served on Leigh.

2. Mr Harley misrepresented that:

1. (a)
   he could advise and do the work competently;

2. (b)
   he would personally undertake the work;
3. (c)
   he would appear at the hearing on 23 March 2016;
4. (d)
   his costs up to and including the hearing on 23 March 2016 were agreed as $5000 (confirmed in his letter dated 15 March 2016 page 2 paragraph 1).

3. Boss Lawyers increased their agreed costs of $5000 for work to and including the hearing on 23 March 2016 to $14,013.20 per invoice dated 23 March 2016:

1. (a)
   without disclosure of that increase;

2. (b)
   without disclosure of the reason for such increase;

3. (c)
   without there being any reason for such increase;

4. (d)
   when the applications could have been resolved for the mere cost of filing Notices of Withdrawal of QUD 1092 and QUD 1102;

5. (e)
   when Mr Harley failed to appear at the hearing on 23 March 2016;

6. (f)
   without disclosure of the costs being for work of a novice solicitor, Luke Walker;

7. (g)
   including costs a solicitor is not entitled to charge inter alia;

1. (i)
   conference with and reviewing and redoing the work of novice solicitor;
2. (ii)
   reading rules and legislation;
3. (iii)
   briefing counsel without and contrary to instruction;
4. (iv)
   $888.36 photocopying of documents the applicant had photocopied and supplied;
5. (v)
   $750 to cease to act.

4. Boss Lawyers billed for work that was:

1. (a)
   not necessary as QUD1092 and QUD1102 had not been served;

2. (b)
   not done (eg prepare submissions and Court Book for hearing on 23 March 2016);

3. (c)
   not done to reasonable standard or of no use (eg inaccurate brief to counsel);

4. (d)
   done without instruction (eg brief to Matthew Jones; application sent to registry without the required affidavit in support);

5. (e)
   done contrary to instruction (eg brief to Matthew Jones, letter to Associate, correspondence to RBG);

6. (f)
   in negligent failure:

1. (a)
   is gross overcharging;

2. (b)
   bills for items that a solicitor is not entitled to charge for;

3. (c)
   is, without notice, three times as much as the cost agreement, $14,013.20;

4. (d)
   fails to take into account that Mr Harley breached the retainer and caused the two applications to be dismissed with costs.

6. Mr Harley submitted to the Court an affidavit sworn on 22 March 2016 of his reason for ceasing to act. The reason stated that the applicant “had enlarged [his] firm’s scope of works” is plainly untrue. In fact, Mr Harley’s work was reduced in scope on discovery that the Notice of Objection to Competency was incompetent and would have been significantly reduced in scope with reasonable competence in determining that QUD 1092 and QUD 1102 had not been served. With reasonable skill Mr Harley could have terminated both proceedings by filing Notices of Withdrawal on 15 March 2016.

Further, the scope of the retainer was reduced as the work agreed to be performed was (a) to prepare a brief to counsel for appearance on 23 March 2016 and (a) [sic] to appear on 23 March 2016, neither of which was necessary in the circumstances.

Further, the work in (a) and (b) was not done. Counsel was not briefed to appear and did not appear for the hearing and Mr Harley did not prepare for or appear for the hearing.

7. Mr Harley acted without instruction inter alia brief to counsel, letter to Associate seeking adjournment to unspecified date, draft consent orders sent to Rodgers Barnes Green.
8. Mr Harley failed to follow instructions and acted contrary to instructions inter alia sent brief to Matthew Jones, failed to determine service of applications, terms of orders by consent.
9. Mr Harley misinformed and failed to inform the applicant of his actions inter alia details of his correspondence with Rodgers Barnes Green regarding efforts to obtain consent orders, as a result of which the Court did not consider that relevant factor in ordering costs against the applicant, and preparations of submissions which he informed the applicant he was undertaking on 22 March 2016 but failed to file.
10. As a result of negligent failure to properly conduct the matter according to the agreement and instruction, and failure to confirm and inform the Court that QUD 1092 and QUD 1102 had not been served, and the failure to file Notices of Withdrawal, the substantive applications QUD 1092 and QUD 1102 were dismissed with costs.
11. Boss Lawyers’ ceasing to act at the hearing on 23 March 2016 caused the applications to be dismissed when they could have been withdrawn under FCR R 35.31 without adverse costs and with minimal client costs. The dismissals resulted in two costs orders against the applicant and irreparable damage to the applicant’s related appeal QUD833.
12. Boss Lawyers failed to do any work that was of use or benefit to the applicant. They unnecessarily incurred their own excessive costs by negligent conduct of the matter. Their negligence has resulted in the applicant losing the right to appeal (causing significant financial loss and other damage) and has caused serious financial damage (of adverse costs) to her in QUD 1092 and QUD 1102.
13. The cost agreement in relation to QUD 1092 and QUD 1102 is Mr Harley’s letter dated 15 March 2016, estimating their costs at $5,000 for preparation for and appearance and counsel’s fee of $5,000 for appearance, on 23 March 2016.

The disclosed costs for QUD 1092 and QUD 1102 were $5,000. Boss Lawyers is only entitled to charge that sum if it did the work it was retained to do and did it to a standard that was of use and benefit to the applicant. That did not occur.

14. The failure to disclose that its costs would be $9013.20 in excess of the agreed amount is a breach of s 315 of the Legal Profession Act 2007.

It is also a breach of Conditions 8.2 and 18.1 of its Cost Agreement.

Under s 316 (3), that failure to disclose is ground to have the costs agreement set aside:

316 Effect of failure to disclose

1. (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 7.

Note—

Under section 341, the costs of an assessment in these circumstances are generally payable by the law practice.

2. (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 7.

3. (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 into a costs agreement with the law practice, the client or associated third party payer may also apply under section 328 for the costs agreement to be set aside.

Further, under s 316:

7. (7)
   Failure by a law practice to comply with this division is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any Australian legal practitioner, or Australian-registered foreign lawyer, involved in the failure.

15. The Tax invoice shows that, in breach of the retainer, the work on the file was given to Luke Walker, an inexperienced solicitor.
16. In breach of the instruction that counsel’s advice be sought on an appeal point, that task was given to Mr Walker.
17. The Tax Invoice also reveals that Boss Lawyers:

1. (a)
   quadruple billed the cost of reading the applicant’s applications;

2. (b)
   double billed the work of Mr Walker;

3. (c)
   charged to prepare submissions and Court Book which were not done/filed;

4. (d)
   charged to prepare documents for the hearing for which they did not appear;

5. (e)
   charged for “work” on 11 and 13 March 2016 before they were retained.

18. Mr Harley failed to issue a Notice of Intention to Cease to Act seven days before ceasing to act, as required by Rule 4.05 of Federal Court Rules 2011:

Termination of retainer by lawyer

1. (1)
   If a party’s lawyer terminates the retainer, the lawyer must:

1. (a)
   serve on the party a notice of intention of ceasing to act, in accordance with Form 7; and

2. (b)
   at least 7 days after serving the notice – file a notice of ceasing to act, in accordance with Form 8.

Instead, Mr Harley failed to appear at the hearing on 23 March 2016 and filed a Notice of Ceasing to Act that same day.

In that conduct, he also breached the client agreement.

19. Mr Harley failed to attend to the matter in a timely manner. The Tax Invoice shows that he did not consider the Notice of Objection to Competency of Appeal until 22 March 2016, the day before the hearing, and that he did not have regard to service of the applications until 22 March 2016. That should have occurred on 15 or 16 March 2016.

Further, he failed to take any appropriate action in relation to those matters and to effect withdrawal of both proceedings without detriment to the applicant.

20. Further, it could and should have been known by Mr Harley from 15 March 2016 that:

1. (a)
   the application for discontinuance of appeal in QUD 1092 was incorrect process as no appeal was on foot;

2. (b)
   the Notice of Objection to Competency of Appeal in QUD 1102 was incompetent as no appeal was on foot.

21. Mr Harley failed to comply with the Federal Court orders in QUD 1092 and QUD 1102 made on 15 March 2016. He failed to file any document. Annexure 4

The Tax Invoice shows that Boss Lawyers (Mr Walker) did not read those orders until 22 March 2016, a date after which all documents were to have been filed.

Further, Mr Harley failed to file a Notice of Solicitor Acting on 15 March 2016 as required by the Court. On 15 march 2016, the applicant telephoned and requested he file the Notice that day. Mr Harley informed her he would do that. He failed to do so.

22. The cost agreement is in contravention of the Legal Profession Act 2007.

23. Boss Lawyers breached the agreement to act in the applicant’s interest, with skill and diligence, and conducted the matter with complete disregard for the serious legal and financial detriment to the applicant that would inevitably result from negligence and failure to appear for the hearing.

30. [30]
    A further amended application was filed on 5 October 2016 claiming that:

1. The original cost agreement (Attachment 1) was breached, misleading and unfair:

1. (a)
   The litigation required, and Mark Harley was retained on the condition, that the work would be done by him as an experienced solicitor. That did not occur.

To secure the retainer, Mr Harley represented in telephone conversations with the applicant on 11 and 15 March 2016 that he had the ability to perform the work as he had previous employment and relevant experience at Cowen and Tucker Lawyers and would undertake the matter as he understood the importance of the matter to enable the applicant finally to have her application for annulment heard. The applicant specifically stated that she did not want a junior solicitor handling the matter as that was the reason the matter was poorly conducted to that date. However, after being retained, Mr Harley did not personally undertake the work.

After being retained and paid, Mr Harley did not personally undertake the work.

Further, My Harley misled the applicant by making these representations before obtaining funds from the applicant.

Further, Mr Harley did not at any time inform the applicant that Luke Walker, an inexperienced solicitor, had the conduct of the two matters.

2. (b)
   Mr Harley failed to prepare for and to appear at the hearing on 23 March 2016, or to take the steps that could have achieved the applicant’s instructed termination of the applications, before the hearing so the hearings did not have to proceed.
3. (c)
   Mr Harley’s billed costs are for work, as preparation for the hearing (inter alia submissions and court book) and to negotiate with Leigh’s solicitor, Rodgers Barnes Green, for consent orders for termination of QUD 1092 and QUD 1102, which was negligent – unnecessary and of no use – when QUD 1092 and QUD 1102 had never been served on Leigh, the applications could have been terminated by filing Notices of Withdrawal under R35.31 of Federal Court Rules 2011 before 23 March 2016, he failed to file any document as ordered by the Court and failed to appear at the hearing on 23 March 2016.

Mr Harley’s representations in the original costs agreement that he could and would competently finalise QUD1092 and QUD 1102 by 23 March 2016 were misleading.

4. (d)
   The making of the original costs agreement and subsequent provision of the Client Agreement that included costs, terms and conditions significantly different from and contrary to the original costs agreement, after the applicant had retained and paid Boss Lawyers’ their agreed costs of $5000 per the original costs agreement, was unfair.
5. (e)
   The Client Agreement is uncertain, misleading and unreasonable in that it:

1. failed to identify the matter to which the costs apply;
2. failed to quantify the costs to 23 March 2016 and costs after 23 March 2016;

3. (iii)
   included costs for “the matter” after termination on 23 March 2016;

4. (iv)
   elevated the agreed costs of $10,000 to potentially $60,000;

5. (v)
   was used by Boss Lawyers to bill their agreed costs of $5,000 at $14,013.20.

2. Mr Harley misrepresented in the original costs agreement that:

1. (a)
   he could advise and do the work competently;

2. (b)
   he would personally undertake the work;
3. (c)
   he would appear at the hearing on 23 March 2016;
4. (d)
   his costs up to and including the hearing on 23 March 2016 were $5000.
5. (e)
   he could and would follow instructions.

3. Boss Lawyers increased their agreed costs of $5000 for work to and including the hearing on 23 March 2016 stated in the original costs agreement to $14,013.20 per invoice dated 23 March 2016:

1. (a)
   without disclosure of that increase;

2. (b)
   without disclosure of the reason for such increase;

3. (c)
   without there being any reason for such increase.

Disclosure of such increase in costs was:

1. (i)
   Condition 8.2 and 18.1 in the Client Agreement;
2. (ii)
   A requirement under s 315 of the Legal Profession Act 2007 (LPA)

That failure to disclose is a breach s 315 of the LPA.

Under s 316(3) of LPA failure to disclose is ground to have a cost agreement set aside:

316 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 7.

Note—

Under section 341 , the costs of an assessment in these circumstances are generally payable by the law practice.

(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 7.

(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 into a costs agreement with the law practice, the client or associated third party payer may also apply under section 328 for the costs agreement to be set aside.

Further under s 316:

(7) Failure by a law practice to comply with this division is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any Australian legal practitioner, or Australian-registered foreign lawyer, involved in the failure.

4. (d)
   when the application could have been resolved for the mere cost of filing Notices of Withdrawal of QUD 1092 and QUD 1102;

5. (e)
   when Mr Harley failed to appear at the hearing on 23 March 2016;

6. (f)
   without disclosure of the costs being for work of a novice solicitor, Luke Walker;

It was a condition of the original costs agreement that Mr Harley conduct the matters. The failure to inform the applicant that Mr Harley was not doing the agreed work was:

(g) including costs a solicitor is not entitled permitted by law to charge inter alia;

The Client Agreement at clauses 5.8 (b) and (c), to charge for (i) and (ii) is in contravention of the common law of costs.

The Client Agreement at clause 6.2, to charge GST on internal photocopying in (iv), is in contravention of the law. Boss Lawyers failed to disclose that they would charge the applicant for the photocopying she had done.

The Client Agreement, at 16.5, does not include provision for costs to be charged in relation to Boss Lawyers’ ceasing to act. The clause is misleading by omission.

Further, Boss Lawyers failed to disclose their costs of $750 to cease to act in breach of their obligation under the cost agreement to make ongoing disclosure.

Further, that failure to disclose is a breach of s 315 of the LPA.

4. Boss Lawyers agreed to perform the work competently and according to instructions but billed for proceeded in such a way that the work was:

1. (a)
   not necessary as QUD1092 and QUD1102 had not been served;

2. (b)
   not done (eg prepare submissions and Court Book for hearing on 23 March 2016);

3. (c)
   not done to reasonable standard or of no use (eg inaccurate brief to counsel);

4. (d)
   done without instruction (eg brief to Matthew Jones; application sent to registry without the required affidavit in support);

5. (e)
   done contrary to instruction (eg brief to Matthew Jones, letter to Associate, correspondence to RBG);

6. (f)
   in negligent failure:

The original cost agreement and the Client Agreement at Clause 3.1 misrepresented that the required work would be done with “professional skill and diligence”.

5. The Tax Invoice (Attachment 2) is evidence that the costs agreements were individually and together uncertain and misleading and resulted in:

1. (a)
   is gross overcharging;

2. (b)
   billing for items that a solicitor is not entitled to charge for;

3. (c)
   is without notice costs three times as much as the original cost agreement, $14,013.20;

4. (d)
   fails to take into account that Mr Harley breached the retainer and caused the two applications to be dismissed with costs.

6. Mr Harley submitted to the Court an affidavit sworn on 22 March 2016 of his reason for ceasing to act. The reason stated that the applicant “had enlarged [his] firm’s scope of works” is plainly untrue. In fact, Mr Harley’s work was reduced in scope on discovery that the Notice of Objection to Competency of Appeal was incompetent, and would have been significantly reduced in scope with reasonable competence in determining that QUD 1092 and QUD 1102 had not been served and, with reasonable skill, Mr Harley could have terminated both proceedings by filing of Notices of Withdrawal on 15 March 2016.

Further, the scope of the retainer was reduced as the work agreed to be performed was (a) to prepare a brief to counsel for appearance on 23 March 2016 and (a) [sic] to appear on 23 March 2016, neither of which, with reasonable diligence and knowledge, was necessary in the circumstances.

Further, the work in (a) and (b) was not done. Counsel was not briefed to appear and did not appear for the hearing and Mr Harley did not prepare for or appear for the hearing.

7. Mr Harley acted without instruction inter alia brief to counsel, letter to Associate seeking adjournment to unspecified date, draft consent orders sent to Rodgers Barnes Green.

8. Mr Harley failed to follow instructions and acted contrary to instructions inter alia sent brief to Matthew Jones, failure to determine service of applications, terms of orders by consent.

9. Mr Harley misinformed and failed to inform the applicant of his action inter alia details of his correspondence with Rodgers Barnes Green regarding efforts to obtain consent orders, as a result of which the Court did not consider that relevant factor in ordering costs against the applicant, and preparation of submissions which he informed the applicant he was undertaking on 22 March 2016 but failed to file.

10. As a result of negligent failure to properly conduct the matter according to the agreement and instruction, failure to confirm and inform the Court that QUD 1092 and QUD 1102 had not been served, and failure to file Notices of Withdrawal, the substantive applications QUD 1092 and QUD 1102 were dismissed with costs.

11. Boss Lawyers’ ceasing to act at the hearing on 23 March 2016 caused the applications to be dismissed when they could have been withdrawn under FCR R 35.31 without adverse costs and with minimal client costs. The dismissals resulted in two costs orders against the applicant and irreparable damage to the applicant’s related appeal QUD833.

12. Boss Lawyers failed to do any work that was of use or benefit to the applicant. They unnecessarily incurred their own excessive costs by negligent conduct of the matter. Their negligence has resulted in the application losing the right to appeal (causing significant financial loss and other damage) and has caused serious financial damage (of adverse costs) to her in QUD 1092 and QUD 1102.

Paragraphs 4 and 6 to 12 are evidence that the original costs agreement misrepresented that Mr Harley could and would perform the work competently.

13. The cost agreement in relation to QUD 1092 and QUD 1102 is Mr Harley’s letter dated 15 March 2016, estimating their costs at $5,000 for preparation for and appearance and counsel’s fee of $5,000 for appearance, on 23 March 2016.

The disclosed costs for QUD 1092 and QUD 1102 were $5,000. Boss Lawyers is only entitled to charge that sum if it did the work it was retained to do and did it to a standard that was of use and benefit to the applicant. That did not occur.

14. The failure to disclose that its costs would be $9013.20 in excess of the agreed amount is a breach of s 315 of the Legal Profession Act 2007.

It is also a breach of Conditions 8.2 and 18.1 of its Cost Agreement.

Under s 316 (3), that failure to disclose is ground to have the costs agreement set aside:

15. The Tax invoice shows that, in breach of the retainer, the work on the file was given to Luke Walker, an inexperienced solicitor.

16. In breach of the instruction that counsel’s advice be sought on an appeal point, that task was given to Mr Walker.

17.  The Tax Invoice also reveals that Boss Lawyers:

18. The Client Agreement, at Clause 16.4, is in breach of the requirement under 13.1.3 of the Australian Solicitors Conduct Rules 2012 that a solicitor give reasonable notice to a client before terminating a retainer.

Mr Harley failed to issue a Notice of Intention to Cease to Act seven days before ceasing to act, as required by Rule 4.05 of Federal Court Rules 2011:

Termination of retainer by lawyer

Instead, Mr Harley failed to appear at the hearing on 23 March 2016 and filed a Notice of Ceasing to Act that same day.

19. Mr Harley failed to attend to the matter in a timely manner. The Tax Invoice shows that he did not consider the Notice of Objection to Competency of Appeal until 22 March 2016, the day before the hearing, and that he did not have regard to service of the applications until 22 March 2016. That should have occurred on 15 or 16 March 2016.

Further, he failed to take any appropriate action in relation to those matters and to effect withdrawal of both proceedings without detriment to the applicant.

20. Further, it could and should have been known by Mr Harley from 15 March 2016 that:

21. Mr Harley failed to comply with the Federal Court orders on 15 March 2016 for filing documents in QUD1092 and QUD1102 made on 15 March 2016. He failed to file any document. Annexure 4

The Tax Invoice shows that Boss Lawyers (Mr Walker) did not read those orders until 22 March 2016, a date after which all documents were to have been filed.

Further, Mr Harley failed to file a Notice of Solicitor Acting on 15 March 2016 as required by the Court. On 15 march 2016, the applicant telephoned and requested he file the Notice that day. Mr Harley informed her he would do that. He failed to do so.

22. 22. The cost agreement is in contravention of the Legal Profession Act 2007.

23. Boss Lawyers have breached the agreement to act in the applicant’s interest, with skill and diligence, and conducted the matter with complete disregard for the serious legal and financial detriment to the applicant that would inevitably result from negligence and failure to appear for the hearing.

Paragraphs 15 to 17, 19 to 21 and 23 are evidence that the original costs agreement misrepresented that Mr Harley could and would perform the work competently.

31. [31]
    Taken together the various iterations of the application and evolving grounds raise the following contested questions of fact about whether the legal practice –

• breached payment preconditions because:
  1. (1)
     Mr Harley did not work on the file personally and appear at the hearing;
  2. (2)
     he was not experienced and sufficiently skilled to do the work competently;
  3. (3)
     of a failure to avert the hearing by consent orders or timely withdrawal of the appeal proceedings;
  4. (4)
     not following instructions;
• acted unfairly in forwarding a costs agreement, including costs in the client agreement, significantly different and contrary to the original costs agreement for $5,000;
• the second costs agreement was unreasonable for:
  1. (1)
     failure to identify or qualify relevant costs;
  2. (2)
     including costs incurred after withdrawal;
  3. (3)
     relying on an unfair costs agreement to demand $9,000 more than the agreed amount without prior notice or without any disclosed reasons in breach of the terms of the costs agreement and statutory disclosure duties;
  4. (4)
     billing for impermissible or excluded items of work including research, duplication, unnecessary photocopying ($888.36) and ceasing to act ($750) and excessive GST;
  5. (5)
     briefing counsel without instructions unnecessarily and negligently;
  6. (6)
     gross overcharging;
  7. (7)
     negligently causing dismissal of federal court applications with costs instead of withdrawing or settling;
  8. (8)
     failure to give adequate notice of termination of the retainer;
  9. (9)
     not acting in the applicant’s overall best interests.

The litigation history

32. [32]
    A strike-out application was refused on 31 January 2017 and the trial of the substantive application listed for 29 March 2017.
33. [33]
    The hearing went ahead but was adjourned part-heard (while the respondent’s principal was still under cross-examination) in the expectation that it would be resumed on 3 May 2017.
34. [34]
    On 27 April 2017 the applicant sought to stay the further hearing pending finalisation of a costs assessment application she had filed in the magistrates court on 23 March 2017.
35. [35]
    The applicant failed to attend the rescheduled hearing on 3 May 2017 without explanation and the matter was adjourned to 23 August 2017.
36. [36]
    The 23 August 2017 hearing date was later vacated and rescheduled for 30 August 2017.
37. [37]
    Both parties were required to attend in person but informed of the possibility of being represented by an agent or appearing by remote conferencing. Both were also advised orders could be made in their absence.
38. [38]
    The applicant unreasonably failed to appear at the hearing and an order that the applicant pay the respondent’s costs thrown away totalling $3894.98 for both the 3 May and 30 August 2017 was made.^[19]
39. [39]
    The applicant’s attempts to have that order stayed and “corrected” were finally refused on 21 February 2018.
40. [40]
    The parties subsequently agreed to an on the papers decision on the basis of the evidence to date.

The rival submissions

41. [41]
    In her final submissions dated 18 December 2017 the applicant asserts:

11. The respondent failed to file a notice as the solicitor on the court record on 15 March 2016 as required by the Federal Court at the directions hearing on that date.
12. The respondent failed to comply with any of the court orders of 15 March 2016 for filing documents in both proceedings.
13. The respondent failed to check prior to 22 March 2016 whether the originating applications had been served and when it found that neither application had been served, failed to take any or appropriate steps to terminate the applications promptly.
14. The respondent failed to ascertain that an application for discontinuance was unnecessary and so failed to use the relevant court rule for terminating interlocutory application related to an appeal by filing a notice of withdrawal in QUD1092, which would have terminated the application before the hearing on 23 March 2016.
15. The respondent failed to ascertain that a Notice of Objection to Competency of Appeal filed in an application for extension of time was incompetent and so failed to use the relevant court rule for terminating interlocutory application related to an appeal by filing a notice of withdrawal in QUD1102, which would have terminated the application before the hearing on 23 March 2016.
16. The respondent failed to undertake any appropriate or efficient step to terminate the applications before 23 March 2016.
17. The respondent acted without and contrary to instruction in sending a brief to Matthew Jones of counsel to appear on 23 March 2016. The brief was inaccurate and irrelevant to the hearing on 23 March 2016.
18. On 22 March 2016 Mr Harley informed the applicant at 5.40pm that he would not appear at the hearing at 9 a.m. on 23 March 2016 and ceased to act.
19. The reason he gave for ceasing to act was increase in the scope of agreed work which clearly is incorrect. The respondent was engaged to terminate two applications and to avoid a hearing if possible and the scope of work was narrowed by the option of filing notices of withdrawal.
20. The Court dismissed the substantive applications QUD1092 and QUD1102 with costs.

42. [42]
    From [33] in her final submission the applicant also contends that the costs agreement is not fair in so far as:

1. (a)
   the respondent created two costs agreements which was misleading and deceptive;

2. (b)
   the respondent’s website misrepresented that:

1. (i)
   Mr Harley had “wide experience” in Federal Court matters when in fact he did not know basic federal court rules;

2. (ii)
   Mr Walker had “a wealth of advocacy experience” when he was in fact a newly admitted solicitor.

3. (c)
   the second costs agreement include prospective work after 23 March 2016 for which the respondent was not retained, and used that to increase the costs agreed to 23 March 2016;

4. (d)
   the respondent did not disclose that a novice solicitor would have day to day carriage of the applicant’s matters under the supervision of Mr Harley;

5. (e)
   the respondent did not disclose that both Mr Harley and Mr Walker would double bill for the same work because Mr Harley would review all of Mr Walker’s work and have conferences with him that were billed because Mr Walker was a novice;

6. (f)
   the respondent did not disclose that he intended to invoke the second costs agreement to inflate his costs agreed under the first agreement;

7. (g)
   the respondent did not disclose that costs had exceeded the $5000 agreed as their costs to 23 March 2016 when that occurred or until they billed $14,013.20;

8. (h)
   the respondent did not disclose that they could not do the required work;

1. (i)
   the respondent ceased to act on 22 March 2016 before the hearing.

34. The applicant contends that if the respondent had disclosed any one of the facts in (b) she would not have engaged them, and that she should have been given the information.
35. The applicant contends that the respondent’s creation of the second costs agreement estimating costs up to $60,000, which was invoked as the costs agreement for simple termination of two applications, was an unreasonable agreement for simple matters.
36. The applicant contends that the respondent’s billing in 5 minute units was unreasonable and misrepresented that the respondent is highly skilled and experienced.
37. Charging beyond the scale of standard professional practice is not reasonable when:

1. (a)
   the work was done by a novice solicitor;

2. (b)
   the work was double billed by the supervisor solicitor;

3. (c)
   further costs were incurred by ongoing billed conferencing between the two;

all of which inflated the costs that would have been incurred by a competent solicitor.

38. The applicant contends that the costs agreements, the original costs agreement letter and the subsequent client agreement, individually and together, are not fair, not reasonable, mislead, are uncertain and in breach of s 315 for disclosure and other requirements for a costs agreement of the LPA.
39. The applicant contends that each ground stated in the application to set aside relates to matters to which the Tribunal may have regard under s 328(2).
40. Further, the LPA specifically does not limit the matters that may be considered.
41. The matters that the applicant raises are each relevant to the issues of fairness or reasonableness of the two costs agreements.
42. The grounds in summary are:

1. (a)
   Paragraph 1: Two costs agreements – uncertain, misleading, unfair, unreasonable;

2. (b)
   Paragraph 2: Original costs agreement – misleading, unfair;

3. (c)
   Paragraph 3: Failure to disclose – breach of LPA and term of agreement;

Breach of common law costs

Impermissible charges of GST

4. (d)
   Paragraph 4: Representations as to competence and skill – misleading, unfair;

5. (e)
   Paragraph 5: Costs – uncertain, misleading and unreasonable;

6. (f)
   Paragraph 6 to 12: Representations of work and competence – misleading, unfair;

7. (g)
   Paragraph 15 to 17, 19 to 21 and 23: Representations of work to be done and with competence – misleading, unfair

8. (h)
   Paragraph 18: Breach of Federal Court Rules 2001 Rule 4.05 in not giving required notice of ceasing to act and Australian Solicitors Conduct Rules 2012 13.1.3 in failing to appear for the hearing.

43. The application raises failure to disclose (paragraph 3) as a ground to set aside. That ground alone is sufficient for a costs agreement to be set aside.

43. [43]
    The applicant also says at [45]-[52]:

45. The grounds raised by the applicant have been determined as relevant to an application to set aside a costs agreement in Green v Lewis Holdway Pty Ltd [2015] VCAT 1802.
46. In that case that involving total billed costs of $19,592.20, the grounds to set aside are: “the law practice failed to comply with its disclosure obligations; incurred costs without express instructions; proceeded with work he had not authorised; charged costs in an unreasonable manner; failed to advise at relevant time that costs were well over estimates given… misleading him into signing the agreements; and failed to send invoices to his correct address.” [5].
47. The tribunal considered the same type of matters as raised by the applicant:

1. (a)
   failure to make disclosure of changes as to costs and person doing the work;

2. (b)
   misrepresentation of matters (costs at the time of costs agreement and personnel);

3. (c)
   acting without instruction;

4. (d)
   conduct before, at the time of and after the agreement was made;

5. (e)
   billing procedure;

6. (f)
   unreasonable costs charged;

7. (g)
   exceeding costs estimate;

8. (h)
   “jumping the gun” in regard to prospective litigation;

1. (i)
   the fact that the client would not have entered the agreement if the costs later charged had been know at the time of the agreement.

48. The Tribunal analysed the evidence related to each matter and the circumstances before, during and after the making of the costs agreement and concluded that each of the matters was relevant to deciding the “fairness” and “reasonableness” of the costs agreement and a ground to set it aside. The Tribunal set aside the costs agreements.
49. In Kasmeridis & Anor v McNamara Business & Property Law [2006] SASC 2006 the Court set aside a costs agreement with the same grounds as raised by the applicant:

1. (a)
   if the amount of costs had been known in advance that solicitor would not have been retained (unfair);

2. (b)
   work performed by a novice solicitor who took more time to do the work, to be instructed, to research and learn, and so incurring more costs (unreasonable).

50. Mr Harley misrepresented at the time of making the costs agreement on 11 and 15 March 2016 that he could and would do the work to 23 March 2016 for $5000 (plus GST) and the fact that he misled the applicant in regard to his ability, to obtain the retainer, only became apparent by his later conduct.
51. The consideration of the fairness and reasonableness of a costs agreement is not restricted to the text of the agreement but encompasses the circumstances before and at the time of the making of the agreement and what occurs later in giving effect to the terms of the agreement.
52. The applicant as a barrister would not have engaged the respondent if she had known the matters would be given to a novice solicitor to handle, for the very reason of what did occur as a result of Mr Harley giving the matters to Mr Walker, namely that the two matters were dismissed with costs because Mr Walker could not do the work and was not properly supervised and assisted by a solicitor who knew the law and the rules.

44. [44]
    And at [54]-[60]:

54. The applicant contends that the respondent’s incurring costs in excess of the agreed amount of $5000 without disclosure to the applicant is a ground to set aside the costs agreements.
55. In circumstances where a law practice has failed to disclose costs in excess of the original costs disclosure/agreement, the conduct of continuing to incur fees without disclosure has also been found to be “unconscionable”: Pentony & Richardson v Goodwin [2007] VCAT 1199 at par [7].
56. In Pentony & Richardson v Goodwin, the law practice filed a claim for unpaid costs as a civil claim in VCAT. VCAT confirmed that such proceeding is a “dispute” able to be brought in the Tribunal and that the requirements of the Legal Profession Act 2004 also apply to a matter that is not brought under that Act: at par [5].
57. The Tribunal fond that the law practice had an ongoing obligation to disclose the client’s liability for costs and had failed to comply with that obligation in billing for an amount of $7000 greater than that in the original estimate/agreement: at par [6].
58. As a result, the Tribunal disallowed the whole amount of costs that exceeded the original disclosure/agreement, in respect of which the law practice had given a bill only after the costs had been incurred: at par [7]
59. The applicant contends that the respondent has similarly engaged in unconscionable conduct and for that reason, the costs agreements are not fair and reasonable.
60. In Kasmeridis, the court referred to material as directly and indirectly related to the issues of fairness and reasonableness of a costs agreement. Nothing was struck out before the hearing on the basis that it was not fixed to the text of the costs agreement, because the Court deemed it may prove to be the outworking of the terms of agreement or evidence of that and the Court needed to properly investigate the costs agreement before deciding how the material was related.

45. [45]
    The respondent filed its response denying the allegations on 19 July 2016. On its case the firm ceased to act and withdrew from the record because the applicant enlarged the scope of agreed services.
46. [46]
    The respondent’s additional submissions filed on 31 May 2017 in compliance with tribunal directions are reproduced below:

1. The “not fair and reasonable” standard

The substantive content of the standard

[2] Section 328 of the Legal Profession Act 2007 (Qld) (LPA) sets out the matters which this Tribunal may take into account when determining whether or not to set aside a costs agreement. This Tribunal will examine whether the costs agreement was “fair and reasonable”.

[3] In Mulcahy v MacDonnells Law Carmody J set out a definitive analysis of the concepts of fairness and reasonableness in the context of section 328 of the LPA as follows:

Fairness relates mainly to the circumstances leading up to the conclusion of or method of obtaining a cost agreement. The requirement of fairness is met if the client agrees to a cost agreement on full information and understanding. ‘Reasonableness’, by contrast, focuses more on its terms and effect; predominantly at the time of entering into the agreement especially as to the method and rate of charging possibly including any significant disparity between the agreement and the scale. [emphasis added].

Without limiting the matters to which the tribunal may have regard in deciding whether or not a costs agreement is fair and reasonable (including relevant common law principles), s 328(2) LPA identifies matters (mainly procedural rather than substantive) that may invalidate a CA [abbreviation: costs agreement], which in summary are:

• any other form of unconscionable, misleading or deceptive conduct of or on behalf of the legal practice or any action having the intended or practical consequence of overriding or vitiating consent such as dishonesty urging pressure or inducing mistakes about the nature or effect of the document; (This reflects the idea that it is wrong for a lawyer to take unfair advantage of a client or to receive any undue benefit from an agreement a dependant or vulnerable client was induced to make on trust. What the tribunal is looking for here is a “real and genuine choice”.)
• a finding of related professional misconduct involving adverse costs implications for the client;
• material non-disclosures about its terms; especially those dealing with the incidence, calculation (by reference to time or event) and amount of costs; […]
• circumstances and conduct before, when or after its commencement that takes advantage of the client’s lack of capacity, knowledge, understanding or experience to the relative advantage of the law practice;
• giving inadequate or confusing information about the ongoing effect of predictable future changes of circumstances on the nature of legal services provided under the CA and the impact on costs; and,
• failure to fulfil the statutory disclosure requirements of an enforceable costs agreement relieves the client of any obligation to pay the costs and the lawyer cannot sue to recover them unless they have been assessed under ss 335 and 340 LPA.

[4] Mulcahy v MacDonnells Law is also significant to this proceeding because Carmody J held that from the perspective of section 328 of the LPA ‘there was no need to update disclosure as to forward estimates because the work performed and charged for [was] within the original range’ stated in the costs agreement. Similarly, the Western Australia Court of Appeal has held that even where:

ultimately the total costs charged in each case substantially exceeded the estimate, that does not of itself establish that the costs agreements were unreasonable. […] Whether, as the appellants allege, work was done which was unnecessary or outside the scope of the appellant’s instructions, or that the costs charged for the work which was done was excessive, are matters for taxation [of costs, that is, as distinct from matters supporting an application to set aside the costs agreement].

[5] The Supreme Court of Queensland judgment of Byrne SJA in Barclay and Ors v McMahon Clarke (A Firm) is binding on this tribunal. In that case, the applicants contended, without any success, that the costs agreement was not fair and was therefore liable to be set aside because ‘no adequate disclosure was made of the basis on which legal costs would be calculated and no range of estimates of the total legal costs was given with an explanation of major variables that will affect the calculation of those costs.’ Yet the Supreme Court had regard to the ‘commercial experience’ of the applicants, and to the fact that like Ms Winn, one of them held a practising certificate as an Australian legal practitioner. Although some necessary disclosure matters were found to have been omitted from the costs agreement, the costs agreement was nevertheless upheld because:

the disclosure notice gave the applicants a fair understanding of the effect of the costs agreement. They must have understood its operation. And they made a free choice to enter into it with information sufficient for their needs. Accordingly, the omission to comply fully with the statutory prescription did not render the costs agreement unfair.

[6] This binding decision of the Supreme Court applies, by referring to ‘information sufficient to [the client’s] needs’, a possibly less stringent test for unfairness in the context of an application to set aside a costs agreement that later expressed in the decision of this tribunal in Mulcahy (namely that the client had agreed to the costs agreement ‘on full information and understanding’). The test applied by Byrne SJA imports a subjective element of unfairness in that it requires that the client adduce evidence that he or she was deprived of the opportunity to gain a fair understanding of the effect of the costs agreement sought to be set aside and that a matter required to be disclosed but omitted was significant to him or her. In the analysis of Byrne SJA:

[The respondent’s] non-disclosure involved a partial failure to comply with the statutory prescriptions. But the omitted information was, it seems, of no significance to [the applicants] when, for themselves and their corporations, they decided to conclude the costs agreement. There is nothing to suggest that the agreement would not have been concluded on the same terms if the omitted disclosures had been made, and there is no reason to suppose that the omitted disclosures mattered to any of the applicants.

[7] Likewise, in this application, Ms Winn has not alleged any facts about the significance she attached to any of the matters that were allegedly not disclosed in the costs agreement. It follows that the presumed sophistication of the client (as a corporation, experienced business person, or another legal practitioner) is a matter that informs the application of the standard of fairness (and by extension, reasonableness) to the client agreement.

The range of circumstances to be considered when the standard is applied

[8] The circumstances relevant to whether this tribunal may, under subsection 328(1) of the LPA, be satisfied that a costs agreement is not fair and reasonable are confined, as a matter of law, to matters connected to the costs agreement itself. Matters relating to the performance of the agreement only do not arise for consideration in the application of the standard. As Carmody J explained in Turner v Macrossan & Amiet Pty Ltd:

The LP Act provides that the Tribunal has the jurisdiction to set aside a costs agreement where satisfied that it is ‘unfair or unreasonable’. The adjectives ‘unfair or unreasonable’ qualify the defined phrase ‘costs agreement’. Therefore, it must be the costs agreement, and not some other aspect of the circumstances or relationship between the parties, which is ‘unfair or unreasonable’. [emphasis added]

As was held in Kasmeridis:

The manner in which the matter in hand unfolded, and how the solicitor actually charged for the work done, is not directly relevant to the question of whether the agreement is fair and reasonable. In some circumstances what later occurred might throw some light on aspects of a costs agreement. But in principle the fairness and reasonableness of the agreement is to be determined at the time at which it was made, having regard to the circumstances in which it was made, and to the retainer in connection with which it was made.

Fairness, in s 328(1) of the LP Act, means fairness according to law. It invites the Tribunal to evaluate the costs agreement against equitable principles and statutory requirements prescribed by the LP Act. This will ordinarily require cautious examination of the circumstances within which the agreement was formed, although it is not limited to such matters. [emphasis added]

Reasonableness is a more objective concept. It requires the Tribunal to examine the language and practical operation of the costs agreement to ascertain whether a fair-minded, independent and disinterested observer, familiar with legal industry standards and the subject matter of costs agreement, [sic] would regard the disputed terms of the agreement as ‘unreasonable’.

[9] Thus in Turner, the grounds relied on by the applicant turned on allegations such as whether a general care and conduct charge of up to 50% is an unusual basis for charging and unfair according to law, and an allegation that there was ‘no sufficient explanation of the fact that the costs agreement could result in the imposition of charges in excess of the applicable Court Scale of Costs’. Self-evidently these are matters connected with the costs agreement itself. But in contrast to this category of matters connected with the costs agreement itself, Carmody J went on to emphasise that:

If the exercise of discretion in establishing the general care and conduct rate, or the failure to distinguish between certain categories of work performed by legal practitioners of different seniority, results in the imposition of unreasonable or unfair legal costs, the appropriate course of action is to file an application for a costs assessment under s 335 of the LP Act. This is because it is the performance of the costs agreement, not the agreement per se, which is unfair or unreasonable. [emphasis added]

[10] On this analysis, allegations going to the ‘performance of the costs agreement’ rather than ‘the agreement per se’ are not appropriate grounds for an application to set aside a costs agreement under section 328 of the LPA; rather they are grounds for an application for costs assessment – an application that has since (although belatedly) been made by the applicant on 23 March 2017 in the Brisbane Magistrates Court Proceeding No. 1752/17.

[11] In Hagos v Carne Reidy Herd Lawyers an applicant seeking to set aside a costs agreement alleged before Thomas J that his former solicitors ‘did not “do their job with due diligence.” He refer[red] to failure to identify and or include certain breaches of his employment contract in [an] amended claim’. However the very same matters that the applicant complained in QCAT that his solicitors omitted to identify or include were in fact raised by him in his employment proceeding in the FCCA after his solicitors’ retainer had been terminated. Thomas J identified that:

Those issues were the subject of a later decision by the Federal Circuit Court of Australia, Judge Jarrett, which was published on 23 May 2013. Judge Jarrett dismissed those possible causes of action, observing ‘the claim based on that clause is misconceived and, in my view, has no prospect of succeeding’, ‘that claim cannot succeed’, ‘the claims are so bereft of merit that to permit their joinder would be pointless’, and that ‘these claims that Mr Hagos wishes to pursue have no prospect of success’.

[12] Thomas J then concluded that given the findings made by the FCCA about the matters the applicant asserted in QCAT about the performance of his former solicitors in support of an application for his costs agreement to be set aside, ‘[i]n the circumstances, the assertion made by Mr Hagos is unwarranted, unjustified and without substance.’ These principles are significant in light of the present applicant’s own attempt to re-litigate matters determined by Collier J in her Federal Court proceeding, as addressed in paragraphs [16] to [21] below.

Outcome of setting aside a Costs Agreement is not contingent upon the determination on whether a Costs Agreement is fair and reasonable.

[13] The outcome of a costs assessment is not contingent upon whether a Costs Agreement is “fair and reasonable” by the decided authorities because:

a. Fairness relates mainly to the circumstances leading up to the conclusion of or method of obtaining a costs agreement. The requirement of fairness is met if a client agrees to a cost agreement on full information and understanding. ‘Reasonableness’, by contrast, focusses more on its terms and effect;

b. ‘Reasonableness’, by contrast, focusses more on its terms and effect; predominately at the time of entering into the agreement especially as to the method and rate of charging possible including any significant disparity between the agreement and the scale

[14] As was held in Kasmeridis, the manner in which the matter in hand unfolded, and how the solicitor actually charged for the work done, is not directly relevant to the question of whether the agreement is fair and reasonable. In some circumstances, what later occurred might throw some light on aspects of a costs agreement. But in principle the fairness and reasonableness of the agreement is to be determined at the time at which it was made, having regard to the circumstances in which it was made, and to the retainer in connection with which it was made.’ [emphasis added].

[15] Therefore there is no prejudice or detriment to Ms Winn by the Tribunal refusing her Stay Application. In fact, the Tribunal is bound to determine whether the Costs Agreement is fair and reasonable in accordance with the relevant determined principles in the case authorities.

[16] Ms Winn also contends, without any proper factual or legal basis, that the assessment of costs in the Magistrates Court (recently filed by Ms Winn) is likely to resolve the current dispute between Ms Winn and Boss Lawyers in relation to unpaid legal fees owing to the law practice because the costs assessment does not bear on any of the matters set out in s 328(2) of the LPA.

[17] There is no practical impact that the outcome of the costs assessment will resolve the current dispute between the parties because the manner in which the matter in hand unfolded, and how the solicitor actually charged for the work done, is not directly relevant to the question of whether the agreement is fair and reasonable.

Findings

47. [47]
    I find that the costs agreement in dispute consists of the written offer to the applicant by the respondent in the documents dated 15 March 2016 which she accepted by conduct (i.e. part payment and giving instructions).  The nature and extent of the legal services to be provided under the agreement are clearly stated in the document and the billing under the agreement is consistent with its terms.
48. [48]
    I am not satisfied that it should be set aside in the exercise of its discretion as unfair or unreasonable having regard to the consumer protection and professional standards objectives of the LPA.  Accordingly, for the reasons that follow the parties are bound by the terms of the costs agreement.
49. [49]
    On the applicant’s case she was induced to enter into two costs agreements, one in the terms of the respondent’s letter dated 15 March 2016, estimating their costs at $5,000 for preparation and attendance to instruct and counsel’s fee of another $5,000 for appearing on 23 March 2016 and a second in terms of the draft client agreement which included unflagged costs substantially more than those agreed on 15 March 2016.
50. [50]
    She says they are both unfair and unreasonable because of uncertainty and deception at the time of inception and should be set aside because (a) she would not have retained the respondent in the first place but for Mr Harley’s representations that he was competent to do the work, would do it personally and according to instructions, and would not withdraw his services at the last minute without notice; and (b) was induced to agree to the terms of the second agreement by the respondent’s representative’s failure to disclose, in breach of s 315 LPA, that it was a device for expanding the scope of works to include briefing counsel and other extra, useless and un-agreed items which increased fees payable from $5,000 to $14,013.20 without her knowledge.
51. [51]
    The applicant did not impress as a reliable historian of probable past events and to the extent of conflict I much prefer Mr Harley’s account of disputed conversations and events over hers.
52. [52]
    On this basis I find that the applicant entered into the written costs agreement of her own free will unaffected by the alleged misrepresentations by Mr Harley.  Even assuming the applicant raised the case to answer the respondent has discharged the obligation on it to show why the costs agreement should not be set aside.
53. [53]
    The costs estimate was not uncertain and did not take unfair advantage of the applicant. There was no agreement to cap the fee payable at $5,000.  Billing $14,013.20 in reliance on the terms of the costs agreement was not unreasonable nor undisclosed.  I find no evidence to support the applicant’s claims of non-disclosure and no indication of relevant unfairness or unreasonableness in the circumstances and conduct of the respondent or its representatives before, when or after the agreement was made. Contrary to her case, the billed amount was well within the (admittedly wide) range of costs identified in writing before the applicant’s acceptance in continuing to use the respondent’s services.  There is no basis for finding that the disclosed information was inaccurate and inadequate to enable the applicant to decide whether to retain the respondent.
54. [54]
    On the contrary, it fully complied with the regulatory regime.
55. [55]
    I reject the applicant’s assertions that the respondent breached any payment preconditions such as that Mr Harley would work on the file personally and appear at the hearing and that no fees for the junior solicitor (Mr Walker) were payable. The estimate of costs was based on Mr Walker’s disclosed rate of $300 per hour.
56. [56]
    Whether any billed items are excessive or impermissible are assessment not enforceability questions but there is no evidence that any less would have been charged by another firm under common law principles. The evidence on these aspects of the dispute was, therefore, not directly relevant, and in any case, there is insufficient evidence that the professional work of the respondent’s lawyers was substandard nor is there any acceptable evidence that they did work unnecessarily. Specifically, there is no proven link between the fairness and reasonableness of the costs agreement and the respondent’s alleged negligence in the dismissal of the federal court applications.
57. [57]
    Briefing counsel was not a changed circumstance having an upward effect on costs. It was within the agreed scope of works and costs estimate.
58. [58]
    The respondent’s untimely withdrawal from the record was not a foreseeable circumstance that could have been addressed before it arose.
59. [59]
    The balance of the application, affidavit material and submissions focus on alleged performance breaches and “gross” overcharging unrelated to fairness or reasonableness issues.
60. [60]
    The application is therefore dismissed.