Fitzpatrick v Shine Lawyers[2025] QCAT 205

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

Disclosure

1. [1]
   It should be noted that I made freezing orders in respect of the litigation the subject of this application.^[1]  I do not have any prior knowledge, at all, of the issues the subject of this application, that is the costs dispute between the applicant and his solicitors, the respondent. Applying the usual test, whether a fair-minded observer, with knowledge of the material facts, might reasonably apprehend that the decision maker is not impartial,^[2] I do not consider that I should recuse myself in respect of this application.

History

2. [2]
   By application made on 31 July 2023, Luke James Fitzpatrick (‘the applicant’), made an application seeking an order that the Conditional Costs Agreement (‘CCA’) entered into between the applicant and Shine Lawyers Pty Ltd (the respondent), on 4 July 2017 be set side pursuant to the Legal Professional Act 2007 (Qld) (‘LP Act’).  Instead, the applicant seeks an order that:

[the respondent’s] fair and reasonable costs be determined as their advertised and promised costs. Being the sole agreed to 2017 CCA costs range limit. Excluding uplift fee.  In accordance with s328(4) & (5)(b) and s327(4).^[3]

3. [3]
   The respondent was engaged by the applicant to conduct litigation arising from a contract between the applicant and his company Car Mojo Pty Ltd (‘Car Mojo’) and Xu Hong Lin (‘the defendant’).  The applicant is the sole shareholder and director of Car Mojo.  Both are parties to the CAA.
4. [4]
   Paragraph 20 of the CCA, notes professional costs in the range of between $44,000.00 and $66,000.00.  With the total estimated cost, including uplift fee (success fee) and disbursements, totaling between $61,000.00 and $112,000.00.
5. [5]
   The litigation was successful, and Car Mojo was awarded costs in the proceedings.^[4]
6. [6]
   The respondent presented the applicant with invoices up to 8 April 2022, which included outlays totaling $772,564.29.
7. [7]
   The applicant applied for the costs to be assessed. The assessed costs on a solicitor and client basis was $334,830.46.
8. [8]
   The respondent had negotiated costs with the defendant in the sum of $455,000.00 on the usual basis, which was paid. The difference between the assessed costs and costs paid by the defendant has been paid to the applicant.
9. [9]
   By rights this difference should be refunded to the defendant.  It is not clear if it has been.  As a general rule, solicitor and client costs (indemnity costs) will be more than the costs paid on a party and party basis (the usual basis).
10. [10]
    The applicant relies on the following grounds to support his application:

    1. the CCA was unfairly and unreasonably entered into by the misrepresentations and inducements of the respondent;
    2. the respondent made a misleading costs estimate disclosure and/or failed to make proper and genuine costs estimate disclosures required under ss 308, 309, 312, 313, 315, and 324 of the LP Act;
    3. The respondent refused to give progress reports on costs as required  under s 317(1)(b) of the LP Act, whilst secretly and unconscionably billing 307% in excess of the CCA professional fees costs estimate; and/or
    4. the respondent failed to gain any further acceptance from the client, as required  under ss 322(3) and 323(3)(c) of the LP Act, of the CCA costs estimate revision.

Applicable law

11. [11]
    Section 328 of the LP Act provides that the Supreme Court or the Tribunal (QCAT) may order that a costs agreement be set aside if satisfied the agreement is not fair or reasonable.  QCAT has jurisdiction pursuant to s 10(1)(b), which states that the tribunal’s original jurisdiction is, ‘the jurisdiction conferred on the tribunal under an enabling Act to decide a matter in the first instance’.  In this case the enabling Act is the LP Act.
12. [12]
    The relevant provisions of the LPA are, as noted by the applicant, contained in Part 3.4 of the LP Act.  Section 299 sets out the main purpose of the part, including ‘to provide for law practices to make disclosures to clients regarding legal costs’ and ‘to regulate the making of costs agreements relating to legal services, including conditional costs agreements’.^[5]
13. [13]
    Section 323(1) states that ‘a conditional costs agreement may provide that the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate’.
14. [14]
    In so far as the applicant’s application in the Tribunal is concerned two sections in particular are relevant, namely ss 315 and 316. These are the sections that regulate obligations to disclose costs and the effect if there is a failure to disclose.  Section 315 provides that:

A law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under this division as soon as reasonably practicable after the law practice becomes aware of that change.

15. [15]
    Section 316(1) provides that ‘if a law practice does not disclose to a client … anything required by this division to be disclosed, the client … need not pay the legal costs unless they have been assessed under division 7’. Division 7 being the statutory basis to allow clients to have their legal costs assessed by an independent assessor.
16. [16]
    Section 316(3) provides for an application to set aside a costs agreement under s 328 of the LP Act. Section 328(2) sets out considerations which may be taken in account by the Tribunal in determining an application to set the agreement aside as follows:

1. (a)
   whether the client was induced to enter into the agreement by the fraud or misrepresentation of the law practice or any representative of the law practice;

…

1. (c)
   Whether the law practice failed to make any of the disclosures required under division 3;
2. (d)
   the circumstances and conduct of the parties before and when the agreement was made;
3. (e)
   the circumstances and the conduct of the parties in the matters after the agreement was made;
4. (f)
   whether and how the agreement addresses the effect on costs of matters and changed circumstances that might foreseeably arise and effect the extent and nature of legal services provided under the agreement;
5. (g)
   whether and how billing under the agreement addresses changed circumstances affecting the extent and nature of legal services provi9ded under the agreement.^[6]

17. [17]
    Section 316(7) provides that:

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.

18. [18]
    In seeking the Tribunal make an order for costs, the applicant relies on ss 328(4)-(6) of the LP Act. Once a costs agreement is set aside, the Tribunal may make an order it considers appropriate in relation to the payment of legal costs the subject of the agreement.^[7]  When making such an order, the Tribunal may apply the applicable scale of costs or decide fair and reasonable legal costs having regard to the matters set out in s 328(5)(b).  However, in making the order, the Tribunal ‘may not order the payment of an amount in excess of the amount the law practice would have been entitled to recover if the costs agreement had not been set aside’.^[8]

The Applicant’s Submissions

19. [19]
    In addressing the considerations in s 328 the applicant submits that:

    1. 1.The applicant was induced into entering the CCA because of the misrepresentation made to him in the CCA, correspondence and advice given to him that the costs would not exceed $112,000.00.  He says that if he had been given a ‘proper and realistic and genuine estimate of their fees’, he would have continued with his old lawyers.
    2. 2.Promissory estoppel applies, and the respondent’s costs should be no more than $112,000.00.
    3. 3.If the respondent had given a costs range as high as $772,000.00, the applicant would have sought mediation over litigation.
    4. 4.If the applicant had been made aware that the respondent’s costs were half of the estimate just four months after signing the CCA, he would have terminated the respondent’s services at that time.
    5. 5. It was a ‘blatant violation of [the LP Act] s317(1)(b)’ not to disclose the significant increase in the legal costs.  The applicant says this is relevant to s 328(2)(e) of the LP Act, and a ground for setting aside the CCA.
    6. 6.Over a period of 14 months, the respondent did not inform the applicant by any means of communication that the estimate of costs set out in the CCA had substantially increased.  This is a breach of s 315 of the LP Act.
    7. 7.On 29 October 2019, the respondent emailed a ‘mediation letter’ showing costs inclusive of outlays of $399,359.00 to the conclusion of the trial.  The final bill delivered was $772,564.29.  The applicant says that if this figure was made known to him, he would have terminated the agreement immediately.
    8. 8.The respondent failed to get the applicant’s agreement to the estimate given on 29 October 2019.  This is despite the applicant writing correspondence expressing concern and asking that ‘the current estimate needs to be reviewed’.  This is contrary to s 322 of the LP Act.
    9. 9.The costs estimate for the freezing order was $25,000.00 given on 20 May 2020.  The total cost of the freezing order and injunction were $79,920.00.  The costs estimate did not include an estimate of the uplift fee nor an estimate of total legal costs, as required by ss 324(3)(a) and 308(1)(c) of the LP Act respectively. The applicant submits, if the actual cost of the freezing order application had been known to the applicant, he would not have made the application. 
    10. 10.The applicant should have been given a genuine estimate of the uplift fee.  The initial estimate was between $11,000.00 and $16,500.00, a revised estimate was $61,311, and the final cost was $107,000.00. The applicant submit, he would not have signed the CCA if the costs estimate had an uplift fee of $107,000.  The applicant says that, pursuant to s 327(4) of the LP Act, because the respondent failed to give a genuine estimate of the uplift fee they ‘must repay the amount received in relation to the uplift fee’.
    11. 11.The substantial costs are far in excess of any amount communicated to the applicant, which is unconscionable, misleading and deceptive conduct and in breach of ss 312(1)(a) and 317(1)(b) of the LP Act.
    12. 12.The respondent cannot rely on any revised costs estimate as none was ever accepted or signed by the applicant as required by s 323(3)(c) of the LP Act.
    13. 13.The respondent did not disclose the barrister’s fees. The applicant says that the respondent ‘appears to have been in a clandestine operation to conceal [its] ongoing costs from the client at every opportunity’. The applicant relies on ss 308, 309 and 315 of LP Act to support this submission.
    14. 14.The applicant provided a chronology setting out the relevant dates. This primarily demonstrates the applicant’s position that the respondent failed to disclose changes in the costs estimate between 4 July 2017 and 20 December 2021. The applicant also notes that there were 12 periods of delay, addressed in some detail in the applicant’s affidavit, leading to a significant delay overall.  These lengthy delays, it is submitted, was the reason costs were not awarded on an indemnity basis. The applicant rejects that COVID contributed to the delay.  This delay, the applicant submits with reference to ss 328(2)(e), 328(5)(b)(e) and 238(7)(i) of the LP Act, amounts to conduct by the respondent after the agreement was made and should be taken into account in deciding fair and reasonable costs.
20. [20]
    The applicant seeks orders that:

    1. 1. the CCA be set aside in accordance with s 328 of the LP Act;
    2. 2. the respondent’s fair and reasonable costs be as set out in the CCA as signed by the parties;
    3. 3. the respondent pay to the applicant the difference between the legal costs previously collected by the respondent and the Tribunal order as to fair and reasonable costs.

The Respondent’s Submissions

21. [21]
    The respondent submits that on 12 August 2023, the applicant filed an application to have their costs assessed, which was granted unopposed.
22. [22]
    On 10 May 2023, the costs assessor filed his certificate with assessed costs of $334,830.46.  On 19 May 2023, the Supreme Court issued an order giving effect to the costs assessor’s certificate.
23. [23]
    No application was made prior to the application filed in the Tribunal on 31 July 2023 to set aside the costs agreement pursuant to s 328 of LP Act.
24. [24]
    Following the awarding of costs at trial, the respondent and the defendant agreed that costs should be settled at $455,000.00. This amount was subsequently disbursed to the applicant in full.  The respondent submits that the applicant having paid $334,830.46 for the respondent’s costs but having received $455,000.00, by way of party and party costs, ‘there exists a clear breach of the indemnity principle’.  The respondent submits that were they required to make a further refund the quantum of the breach of the indemnity principle would be greater.
25. [25]
    The respondent further submits that the proper sequence for the applicant to follow would be to first apply to have the CCA set aside, pursuant to s 328 of the LP Act, where upon the respondent would have prepared a new bill, then the applicant could have applied for that new bill to be assessed.
26. [26]
    In the circumstances, the respondent submits that ‘this is a case to which the principle of issue estoppel if not res judicata applies’, and ‘accordingly, it is an abuse of process and liable to be struck out’.

The Applicant’s Submissions in Reply

27. [27]
    In reply, the applicant submits that the CCA does not set out any process for making either an application for costs assessment or setting aside costs.  Indeed, the applicant submits, in the CCA disclosure statement, clause 10 states:

If there is a dispute in relation to legal costs, you have the right to apply for costs to be assessed and apply for the costs agreement to be set aside. Any application for costs to be assessed must be made within 12 months of delivery of bill or request for payment or any extended time permitted by the court or costs assessor. An application to set aside the costs agreement must be made within 6 years. (Emphasis as per applicant’s submissions.)

28. [28]
    Accordingly, the applicant says that he followed the order in which it appears in the disclosure statement.

Discussion and decision

29. [29]
    The applicant applies to have the CCA set aside.  He has previously had the respondent’s costs assessed by an independent assessor.
30. [30]
    As a result, the applicant has received a refund of costs to which he is not entitled.  If the defendant paid to the applicant an agreed amount of costs as part of the order of the Court which was more than the amount of costs the applicant had to pay after assessment, then, it is in my view that, the defendant is entitled to a refund.
31. [31]
    The costs paid by the defendant are not damages payable to the applicant.  Costs awarded at the end of a trial are to reduce the legal costs of the successful party, in this instance the applicant. As articulated by Chesterman JA, with whom White JA agreed, ‘the unsuccessful litigant is not required to pay any more than the costs incurred by his successful opponent’.^[9]
32. [32]
    The Tribunal has not been made aware of what the applicant has done with the refunded legal costs in excess of $334,830.46.
33. [33]
    A threshold question in the circumstances of this case, is whether the applicant is barred from bringing this application, due to issue estoppel or res judicata, as submitted by the respondent. The basis of the respondent’s submission is that the applicant has sought and received an assessment of the respondent’s costs.  The assessment in and of itself does not seem to me to be a bar to setting aside the costs assessment.  If the provisions of s 328(2) of the LP Act are met to the satisfaction of the Court or Tribunal, then the costs agreement may be set aside, and the consequences thereof follow.  However, the application is complicated because of the issue raised in the preceding paragraphs.
34. [34]
    Part 3.4, Division 1 of the LP Act sets out the main purpose of costs disclosure as;

1. (a)
   to provide for law practices to make disclosures to clients regarding legal costs;
2. (b)
   to regulate the making of costs agreements relating to legal services, including conditional costs agreements;^[10]

35. [35]
    Not only is there an obligation to disclose, there is an ongoing obligation.  Section 315 of the LP Act states:

A law practice must in writing, disclose to a client any substantial change to anything included in a disclosure already made under this division as soon as reasonably practicable after the law practice becomes aware of that change.

36. [36]
    Section 316 sets out the effect of failure to disclose. Two such effects are that the client ‘need not pay the legal costs unless they have been assessed under division 7’(the division that regulates costs assessments);  and an application may be made under s 328 for the costs agreement to be set aside.^[11]
37. [37]
    Having already proceeded under s 316(1) of the LP Act, the applicant now seeks a set aside order.  The applicant complains, as he no doubt had a right to, given that the costs rose from a maximum of $112,000.00 to over $700,000.00.
38. [38]
    When one looks at what he says constitutes his reasons for set aside he primarily relies on the failure by the respondent to continue to disclose the position with respect to costs.
39. [39]
    I do not accept that the respondent induced the applicant to enter into the agreement by fraud or misrepresentation.  It will always be the case that costs will be estimated on what is known at the commencement of proceedings.  It is apparent that the litigation was expansive.  It is difficult to say that the respondent underestimated costs as an inducement.  What is clear, is that as the litigation became more involved, and no doubt strongly contested, the costs mounted up.  The respondent does not appear to have been forthright enough in its disclosures about the mounting costs.
40. [40]
    It is unlikely that, as the applicant submits, he would have cancelled the CCA and gone to mediation. Given the way the litigation was conducted by the defendant this would not have been a reasonable alternative.
41. [41]
    Section 328(2)(b) of the LP Act is not relevant.  Section 328(2)(c) is relevant as the respondent failed to make disclosures required under division 3.  The respondent did make some disclosures, which the applicant says he did not agree to, nonetheless, the disclosures were inadequate.
42. [42]
    Section 328(2)(d) of the LP Act is not relevant as there is no evidence of the circumstances and conduct of the parties before and when the agreement was made which would reflect the respondent acted in bad faith or with intent to mislead.  The applicant says that the assurances of the respondent in respect of the total costs is relevant.  However, as stated there is nothing to suggest they were not acting in good faith when the CCA was signed.
43. [43]
    Section 328(2)(e) of the LP Act is said to be relevant by the applicant because of the delays of the respondent in prosecuting the litigation.  COVID may have been an issue, but not one to which I give much weight.  Delay itself is something that goes to the heart of an agreement between law practice and client.  It is always important for matters to proceed expeditiously.  Again, similar to increased costs, the delays should have been disclosed to the applicant.
44. [44]
    In so far as ss 328(2)(f) and 328(2)(g) of the LP Act are concerned, the CCA does set out, in paragraphs 21 and 22, that changed circumstances may arise and the requirement of the respondent to provide the applicant with a revised estimate.
45. [45]
    Other factors I have taken into account are that: it is important to note that the applicant was ultimately successful in the litigation; costs were ordered and paid by the defendant; and the applicant had a right to seek a costs assessment, as has happened.
46. [46]
    In all the circumstances, I am not satisfied that the CCA should be set aside.  It is a matter which was properly dealt with under s 316(1) of the LP Act. That assessment appropriately addressed the respondent’s tardiness in disclosing matters that were properly disclosable.
47. [47]
    The complicating factor to this current application is that if the CCA was to be set aside then any refund of legal costs would not be payable to the applicant, but to the defendant.

Orders

48. [48]
    The applicant’s application to have the CCA set aside is dismissed.
49. [49]
    There is no order as to costs associated the applicant’s application subject of these reasons.