Paroz v Clifford Gouldson Lawyers
[2012] QDC 151
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- Unreported Judgment
- Paroz v Clifford Gouldson Lawyers[2012] QDC 151
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Paroz v Clifford Gouldson Lawyers[2012] QDC 151
Paroz v Clifford Gouldson Lawyers[2012] QDC 151
DISTRICT COURT OF QUEENSLAND
CITATION: | Paroz v Clifford Gouldson Lawyers [2012] QDC 151 |
PARTIES: | LESLIE ROLAND PAROZ AND CLIFFORD GOULDSON LAWYERS |
FILE NO/S: | OA1747/10 |
DIVISION: |
|
PROCEEDING: | Review of costs assessment |
ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 26 June 2012 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 25 January 2012 |
JUDGE: | McGill DCJ |
ORDER: | Order for partial reassessment, and consequential orders, in terms to be finalised. |
CATCHWORDS: | COSTS – Assessment – effect of failure to make disclosure required by statute – whether double penalty. COSTS – Assessment – effect of costs agreement not complying in a material way with disclosure obligations – assess on the basis of a fair and reasonable amount. COSTS – Solicitor and client – costs agreement – whether applicable to work already done – how costs to be assessed. COSTS – Solicitor and client – disclosure obligations of solicitor – effect of material non-compliance on assessment. Legal Profession Act 2007 ss 300, 308, 310, 316, 319, 322, 335, 340, 341. UCPR r 678. Bannerot v Waddington [2008] QDC 332 – cited. Gilbert v Kozicki [2007] QSC 268 – considered. Herald v Worker Bee (Brisbane) Pty Ltd [2004] 2 Qd R 263 – considered. |
COUNSEL: | G.J. Robinson for the applicant N.P. Hiscox for the respondent |
SOLICITORS: | Hopgood Gamin for the applicant The respondent represented itself |
- [1]This is a review under r 742, made applicable by r 743I(1), of a costs assessment under the Legal Profession Act 2007 (the Act) and Part 4 of Chapter 17A of the UCPR 1999. In about June 2008 the applicant consulted the respondent about certain litigation in which he was then involved, and in which he had previously had other solicitors acting. They acted for him for a time, but in early April 2009 terminated the retainer after certain conduct on his part. About a week later, however, following lengthy negotiations between them, there was a new retainer and a costs agreement was signed by both parties. Later in 2009 the retainer was again terminated. On 28 August 2009 the respondent delivered an itemised bill under the Act.
History of proceeding
- [2]On 17 June 2010 the applicant filed an originating application in this court seeking an order for the assessment of “all cost incurred and invoiced by [the respondent] for services provided to the applicant between the period 7 June 2008 and 2 July 2009”. On 22 July 2010 an amended application was filed, but the only difference appears to have been that a different costs assessor was nominated. That application came before another judge on 27 July 2010, at the same time as an application filed by the respondent, which sought among other things a direction that the files which, pursuant to a Supreme Court order on 1 October 2009, the respondent had handed over the applicant be returned to the respondent. It does not appear that any order was in fact made on the respondent’s application.
- [3]The order on the originating application was that the bill of costs[1] at pp 9-36 of Exhibit MJS-1 to the affidavit of Michael John Smith filed 17 June 2010 be assessed, that a particular person be appointed to assess the costs and that the costs of the application be reserved. In the circumstances, the reference to pp 9‑36 is somewhat cryptic. Even if one begins counting pages from the first page of the affidavit, the itemisation begins on p 7. There is no apparent natural division between p 8 and p 9 of the exhibit in the itemisation; p 8 ends with an item on 17 September 2008, and p 9 begins with an item on the following day. After p 29 there is a copy of a tax invoice of 5 August 2008 on p 30, followed by a remittance advice and some pages of “activity during the period”, which is rather like an itemised bill, which extends up to p 36. This, however, covered the period from 7 June 2008 to 4 August 2008 and appears to duplicate what appears on pp 3, 4, 5 and part of 6 of the itemisation; the two seem to cover the same ground, and it is difficult to believe that his Honour’s intention was that, in respect of this part of the work, what was to be assessed was the invoice with the particulars attached rather than the itemised bill. On the whole, I think the most plausible explanation is that the wording of the order was a mistake.
- [4]That order was made pursuant to s 335 of the Act, and on an application under r 743A. Rule 743G provides that the court may hold a directions hearing in relation to an application for a costs assessment and at the hearing may consider various matters set out in sub-rule (2), including whether any costs agreement relied on by the lawyer concerned is void and whether anything else should be done before the costs are assessed. Sub-rule (3) provides that if the grounds of dispute relate only to the amount of costs, the relevant court may order that a particular costs assessor be appointed to carry out the costs assessment or otherwise order that the application be heard by the relevant court.
- [5]There was before his Honour a faxed copy of an affidavit, the original of which was filed on 28 July 2010 by leave, where the applicant said that he disputed all of the costs charged and believed the total amount charged to be excessive: para 8. However, in an affidavit by the solicitor for the applicant, also filed by leave that day (Document 10), there was passing reference to at least the possibility that the applicant might be raising issues as to the validity of the costs agreement, as well as whether there had been a failure to make disclosure under ss 308 and 315 of the Act, and whether there was one or more than one retainer. There was on the file, but not read before his Honour, an affidavit by the applicant’s solicitor filed 22 July 2010, which exhibited a copy of the notice of objection on behalf of the applicant. This included a general objection that there was a separate retainer in respect of each of two pieces of litigation where the applicant was a party, and an ongoing dispute over an agistment agreement which had not at that stage led to litigation. It also alleged that there had been a failure to make disclosure as required under the Act, which triggered s 316(4) of the Act. The point was also taken that the requirement for a written agreement as soon as practicable after the law practice was retained had not been complied with.
- [6]The reason for r 743G(2) and (3) is that, although disputes as to the quantum of costs are appropriately determined by a costs assessor, if there is a more wide-ranging dispute, for example as to whether the solicitor was negligent and should be deprived of some or all of the fees as a result, it is more appropriate for that issue to be determined by the court in a hearing, if necessary with witnesses, prior to the actual assessment taking place. The assessor can deal with the matter on the basis of findings by the court as to what the situation was. The position I think was the same here. If there was an issue as to the validity of the costs agreement, or as to the effect of non-disclosure, or as to any other matter which affected the bill in a substantial general way, it would have been better for the matter to have been decided by the court prior to referring the bill to the assessor. However, in circumstances where the affidavit including the notice of objection was not read before his Honour, it is unsurprising that this did not come to his Honour’s attention and he simply ordered that the costs referred to in the itemisation annexed to the affidavit be assessed.
- [7]It may be noted that what can be assessed under s 335 is “the whole or any part of legal costs.” These are not necessarily assessed by reference to any particular bill, as is made clear by subsection (5), which indicates that a costs assessment can be ordered in circumstances where no bill has been given. Obviously, however, an assessment can only take place by reference to a bill; s 329 contemplates that they will not be recoverable unless a bill has been served, and s 332 permits a person entitled to apply for an assessment of legal costs to request an itemised bill. Rule 743C provides that the court may give directions for the preparation of an itemised bill if there is no such bill for all of the costs to be assessed under an application. The system therefore proceeds on the basis that what will come to the assessor in the fullness of time is an itemised bill. There was, however, in the present case before the court something which was in effect an itemised bill, described as an “itemisation”, and there was no reason, it seems to me, in principle why that bill could not have been assessed. That seems to me to have been the effect of his Honour’s order: it was an order for the costs assessor to assess that bill pursuant to the Act.
The assessment
- [8]It appears, however, that the costs assessor accepted the applicant’s point and directed the respondent to draw a separate itemised bill for each matter. The respondent declined to comply with that direction, and on 23 March 2011 the costs assessor referred to the court, pursuant to r 717(2), three questions as follows:
“1. Is it open for the costs assessor to direct that the respondent is restricted to costs drawn on the Supreme Court scale pursuant to the application of s 319(1)(b) [of the Act] and/or pursuant to the application of s 316(1) [of the Act]?
- Is it open for the costs assessor to direct that three separate itemised bills be prepared and not one?
- If the answer to Question 1 is in the affirmative, should any costs order arising out of this application include provision for the costs assessor’s fees arising out of the respondent’s refusal to comply with directions?”
- [9]It occurs to me that it might have been better if what had been referred to the court was the question of what was the correct decision in relation to these matters rather than whether the costs assessor’s decision was open to him, presumably in an administrative law sense. The questions raised matters which were I think appropriately identified by the costs assessor as issues which needed to be decided before the actual assessment took place. The referral recited that the disclosure notice signed by the parties dated 15 April 2009 did not comply with the requirements of the Act, and that pursuant to s 316(1) the applicant did not have to pay legal costs until they had been assessed in accordance with Division 7 of the Act, which he said “in this instance would mean they would be assessed pursuant to the Supreme Court scale of costs.” It is not clear whether the assessor thought that that followed from s 316, but I suspect not because he went on to note s 319(1)(b) of the Act, which requires assessment pursuant to scale in the absence of a costs agreement.
- [10]The referral came before another judge on 14 April 2011. Both parties were represented and presumably made submissions; the file includes submissions in writing and an affidavit in support filed on behalf of the respondent. What his Honour actually ordered, however, was that the costs assessor have the powers of an assessing registrar under r 714, but otherwise referred the matter back to the costs assessor under r 717 without answering any of the questions. The former order enabled the costs assessor to exercise the power to give directions about the conduct of the assessment process: r 714(f). Presumably this involved a decision by his Honour that the direction to prepare and file new itemised bills could or might not be validly made under r 720(1), but required this additional power. I have been unable to ascertain his Honour’s reasons for this order.
- [11]In any case, after the order was made the respondent complied with the direction and filed the three bills, and they were apparently the itemised bills that were in fact assessed. The matter then seems to have proceeded on the basis that the assessor was thereafter conducting three assessments, of the three replacement itemised bills. On 13 December 2011 he filed three separate costs assessor’s certificates in the court, one for each of the three new itemised bills. It is not entirely clear to me that that was consistent with the requirements of the Act. In circumstances where the Act gives a right to an assessment of “the whole or any part of legal costs”, then the outcome ought to be an assessment of the whole of the relevant legal costs. In the present case, it is clear that the applicant sought the assessment of the whole of the legal costs, and that appears to have been the effect of the original judge’s order. Presumably, however, the costs assessor’s determination in relation to those costs can be worked out simply by adding together the amounts assessed in each of the three certificates.
- [12]The certificates were as follows:
- (a)The costs in action 9656/04, which were assessed at professional fees of $65,125.14 and disbursements of $3,894.25. (Document 20)
- (b)The costs in action 6135/06, which were assessed at professional fees of $7,756.05 and disbursements of $10.25. (Document 22)
- (c)The costs of the agistment dispute, which were assessed at professional fees of $4,819.12 and disbursements of $24.34. (Document 21)
- [13]The costs of the assessment were assessed at $26,566.90, and ordered to be payable by the respondent. The costs assessor apportioned these among the three certificates, as he did the amount which had already been paid to the respondent in respect of the costs, overall $43,847.40. Again, I suspect this does not matter; one would achieve the same result by reference to the total assessment.
- [14]The certificates having been filed, on 20 December 2011 a deputy registrar ordered the applicant to pay to the respondent the amounts assessed as payable in each of the three certificates. On 3 January 2012, the respondent applied to set aside each of the certificates, though the application was said to be pursuant to r 742(6)(b), so that in substance the respondent was seeking review pursuant to r 742. The matters referred to in the application cover the major issues between the parties, whether there was a valid costs agreement, whether the costs were properly assessed in accordance with ss 340 and 341 of the Act, and whether certain findings of the costs assessor, which appear to have been of general application rather than in relation to specific items, ought to be set aside. On 12 January 2012, the applicant filed particulars of objections, which were the objections provided by the applicant to the three itemised bills prepared and supplied to the costs assessor and the applicant pursuant to the direction of the costs assessor. Presumably these were before the costs assessor, and put forward the arguments of the applicant in relation to those three separate bills. The applicant also filed a copy of his original notice of objections.
Reasons of the assessor
- [15]On 13 December 2011 the costs assessor filed in the court reasons for his decisions. I was told that he did this spontaneously rather than in response to any particular request to provide them. Nevertheless, it is useful to have them. The costs assessor found that the respondent commenced acting on 7 June 2008, and terminated the retainer on 6 April 2009. Prior to that time no costs agreement had been entered into, and there had not been disclosure as required by Division 3 of the Act. He said that although the applicant had subsequently signed a costs agreement and disclosure notice, the respondent had again declined to act for the applicant. He found that the costs agreement signed on 15 April 2009 contained no provision as to the ratification of earlier charges consistent with its terms, and impliedly found that it was not retrospective in operation. Accordingly, he concluded that from 7 June 2008 to 6 April 2009 s 319(1)(b) of the Act was applicable and the respondent was limited to charging costs on the Supreme Court scale. In addition, the respondent had not complied with the various components of disclosure required by Division 3 of the Act.
- [16]The assessor noted the history of the assessment process, which I have referred to already, and that the respondent was liable for the costs of the assessment pursuant to s 341(2)(a) and (b) of the Act, as the costs had been reduced by 15% or more and because the costs assessor was satisfied that the law practice failed to comply with Division 3 of the Act before the retainer was terminated. The costs assessor also said that the allowance under Item 1 of the Supreme Court scale for care and consideration was fixed at 20% “because of the respondent’s failure to comply with Division 3 of the Act, pursuant to the costs assessor’s discretion under s 316(4) of the Act.” Unfortunately, he did not say what allowance would have been made but for the exercise of this discretion. Nor, for that matter, did he give any reasons for the exercise of the discretion in that particular way. The costs assessor noted that there had been submissions as to whether the respondent’s costs should be reduced because of the quality and nature of the legal services provided to the applicant, but said that this was a matter for determination by the court rather than by a costs assessor. That was appropriate. No issue arose as to this for the purposes of this review.
- [17]The costs of the assessment were found to be the costs assessor’s fee of $18,810, and the applicant’s costs incurred after the assessment of the costs statement, and the applicant’s costs incurred after the assessment of the costs statement started: r 733(3)(c). This was found not to include the preparation of the objections delivered 16 July 2010, but included the preparation of the objections delivered 18 August 2011 following the lodging pursuant to the costs assessor’s directions of the three separate itemised bills. The applicant’s costs of the assessment were allowed at $7,756.90, with a “marked copy” of the applicant’s bill made available to the parties. Accordingly, the costs of the assessment, that amount plus the assessor’s fee, total $26,566.90.
Submissions on the review
- [18]On the hearing before me it was submitted for the respondent that, when the respondent was initially consulted, the matter had some urgency because a strikeout application was pending. It was submitted that in fact the applicant had been informed of his rights and obligations and that he was given information which mirrored the information required under s 308 of the Act, although not in the requisite form. He was also provided with a written client agreement in accordance with the Queensland Law Society Act 1948, which in fact contained the critical details required by s 308 of the Act, though it appears he never signed and returned that agreement. Nevertheless, he continued to give instructions and work with the lawyers in connection with the strikeout application and several subsequent court appearances until that on 6 April 2009. At that point the relationship between the parties broke down, as a result, according to the respondent, of the applicant’s having written, without the knowledge of his solicitors, seven letters directly to the court in relation to the matter. In these circumstances, the solicitors had no alternative other than to withdraw from the record.
- [19]There were, however, further discussions between the parties, as the applicant wanted the respondent to continue to act on his behalf. Eventually agreement was reached as to the terms of a retainer under which the respondent would continue to take instructions, and a new client agreement was signed on 15 April 2009, which was in accordance with the requirements of the Act. More work was done and further invoices were sent, but subsequently the respondent again terminated the retainer. The respondent relied on submissions to the costs assessor of 30 August 2010 as showing that compliance with obligations as to disclosure were provisionally met, and that for various reasons the impact of inadequate disclosure on the applicant was minimised. It was submitted that the further client agreement of 15 April 2009 complied with the Act, and the disclosure obligations, and that thereafter further work was done and further instructions were given. That client agreement in terms was retrospective to June 2008.
- [20]In these circumstances, it was submitted that the failure to make full disclosure had no adverse effect on the applicant, so that no penalty should be imposed under s 316(4). It was submitted that there had been a double penalty imposed in requiring assessment on the Supreme Court scale, and in exercising the discretion under s 316. It was also said that the assessment under the Supreme Court scale was on the standard basis, which involved an additional penalty because it excluded costs which would otherwise have been recoverable as between solicitor and client. It was also pointed out that the client had previously had other solicitors acting and had received similar disclosure from those solicitors. Overall, it was submitted that the outcome was unjust according to the fair and reasonable value of the legal services provided, that the bills should have been reviewed on the indemnity basis.
- [21]Counsel for the applicant submitted that the original costs agreement forwarded on 23 September 2008 was drafted in the light of the provisions of the Queensland Law Society Act which had been repealed well before that time, and in any case there was no evidence that it had ever been signed. Even if it were treated as a costs agreement under the Act, there was nothing in the agreement indicating that it could be accepted by conduct other than an acceptance in writing, and therefore it could not be said to have been accepted in any other way, such as by continuing to provide instructions: s 322(4) of the Act. In any case, the agreement on its face was confined to one of the three retainers because it applied only to the partnership dispute. There was also a failure to comply with the mandatory disclosure requirements, in eight specific matters. The interest rate for overdue payments was higher than the amount allowed by the Act. Accordingly, s 316(4) was triggered. The costs agreement entered into in April 2009 should not be given retrospective effect. It was not expressed to operate retrospectively, and there is no reason to imply such a term into that contract.[2] Disclosure by that agreement was too late to deal with the costs incurred earlier: s 310. Overall, there was no valid costs agreement in place at any material time, and in any case the failure to provide proper disclosure had excluded the operation of the costs agreement: s 340(1)(c). Even if the agreement in April 2009 had been effective as a costs agreement with proper disclosure for future work, there was none included in any of the bills for assessment.
- [22]There was also some objection by the applicant to some of the material put before the court by the respondent as to the history of the relationship between the parties. It was submitted that this was not in terms before the costs assessor, so that its use was contrary to r 742(5). The respondent submitted that at least most of the material was before the costs assessor in the form of submissions. Ultimately it is not necessary to resolve this, as nothing in that material was critical to the outcome of the review.
Analysis – disclosure
- [23]The respondent did not submit that there was a valid costs agreement entered into at about the beginning of the retainer, but that the disclosure in fact made then, although expressed in terms more applicable to the obligations for disclosure under the previous regime, amounted to substantial compliance, or at least significant compliance, with the obligations of disclosure in the Act, so that the requirement of s 340(1)(c) had not been met. That requires a comparison between the requirements of disclosure under s 308 of the Act and what actually occurred.
- [24]The respondent relied on a letter or a draft letter dated 23 September 2008 and an enclosed work plan and “important notice to client” as satisfying the disclosure obligations.[3] This was the draft costs agreement which apparently was never signed and returned. At one time the respondent was contending that the document was, or at least evidenced, a costs agreement on the basis that it had been accepted by conduct. Section 322(2) of the Act requires a costs agreement to be written or evidenced in writing, and this agreement was not written. Subsection (3) permits the costs agreement to consist of a written offer that is accepted in writing or by other conduct, but this is subject to subsection (4) which requires the offer clearly to state the type of other conduct that will constitute acceptance. There is nothing that I can find in this letter or the attached documents which specify the type of conduct, other than acceptance in writing, that will constitute acceptance of the written offer. To the contrary, the letter and the written offer are expressed on the basis that it is to be signed by the client. Close to the end of the letter, there is a statement:
“By signing the duplicate copy of this work plan, you acknowledge that you have read, understood and agreed to be bound by its terms.”
- [25]In these circumstances, even apart from the terms of the Act, the terms of the offer clearly indicate that what is required is acceptance in writing by signing the document, and in circumstances where that did not happen there was in my opinion no acceptance of the offer constituted by this letter and the enclosures.
- [26]In terms of disclosure, the relevant statutory obligation is that set out in s 308(1) of the Act. The result of comparing what was set out in the documents with the statutory obligation is as follows:
- (a)The letter states that charges of the work will be based on hourly rates for the time necessary to complete the work on your behalf, and in the work plan, the hourly rates are set out. The document on page 2 says that a scale of fees applies to the legal costs ordered in litigation, said to be enclosed, but that does not seem to be endorsed. Partly satisfied.
- (b)There is a statement about the client’s right to negotiate this costs agreement before it is signed in the important notice, para 3. There is reference to accounts being submitted monthly or upon completion of the matter, but no reference to the right to request “a bill”, let alone a right to receive an itemised bill under the Act. There is a statement that if fees are likely to change, “we will provide you with a written update of the estimated fee”, but not a statement that this is a right which operates by reference to s 315 of the Act, and that it applies to all matters disclosed under s 308. Not satisfied completely.
- (c)There was an estimate of the fees for stages 1, 4, 11 and 12 of the work plan, and estimates of a range of fees for each of stages 2, 3 and 6; all that was said about stages 5, 7, 8, 9, 10 and 13 was that the fees would be “hourly rate”. There was an explanation of the major variables affecting the amount of costs on page 1 of the letter. Partly satisfied.
- (d)This was satisfied by the statement that accounts would be issued monthly or upon completion of the matter.
- (e)The requirement of the statute to state the rate of interest that would be charged in respect of overdue legal costs was complied with. The problem was that the restriction in s 321(3) of the Act and in s 82 of the regulation, that the rate not be more than 2% above the Reserve Bank cash rate target, was not incorporated in the disclosure, and hence not necessarily adhered to if the stated rate of 10% was charged. Partly satisfied.
- (f)What was said about costs recovery was that, if successful in litigation, he may recover some of the fees, estimated at one-third to one-half of the total costs. This, however, did not provide a range of estimated amounts. The same applied to the estimate of costs payable if unsuccessful. There was no express statement that an order by the court for the payment of costs in favour of the client will not necessarily cover the whole of the client’s legal costs, though the estimate that the best that the client might hope for was to get half his legal costs back indicated by implication that the whole of the costs would not be recovered. Partly satisfied.
- (g)There was no reference to progress reports, let alone that the applicant had a right to them under s 317 of the Act. Not satisfied.
- (h)The letter referred to two people who could discuss concerns or questions regarding the conduct and progress of the work plan, but there was no specific reference to people with whom legal costs could be discussed. Not satisfied.
- (i)There was no reference to these matters, whether or not under the Act. Reference was made instead to the former mechanism of applying to the Solicitors Complaints Tribunal to appoint a cost assessor, which was misleading. Not satisfied.
- (j)The same applies necessarily here.
- (k)I cannot identify anything in the documentation which pointed out that the law of Queensland applies to legal costs in relation to the matter. Not satisfied.
- (l)No particular reliance was placed on this provision.
- [27]There were references in the document to challenging the amount of an account by applying to the Solicitors Complaints Tribunal for the appointment of a costs assessor, and as to the effect this would have on the ability of the client to be sued for outstanding fees or costs, which did not reflect the current regime. Information which was relevant to the operation of the current regime was not provided. Overall, I conclude that the disclosure in writing to the applicant in this documentation did not comply, in several material respects, with the disclosure requirements of Division 3 of Part 3.4 of the Act. I consider that the costs assessor was correct in coming to the same conclusion, so as to trigger s 340(1)(c). Section 340 therefore did not require the disputed costs to be assessed by reference to the provisions of any costs agreement, even if there was one, which would have otherwise applied. It follows that the criteria for assessment were those set out in s 341, with subsection (1)(c) not excluded.
Effect of inadequate disclosure
- [28]It was submitted on behalf of the applicant that for various reasons the inadequate disclosure did not have any adverse effect on the client, or that the adverse effects were minimised, because the client had been fully informed orally of all matters required to be disclosed, was an experienced litigator who had previously had four other solicitors in the matter, needed legal representation urgently in a complex matter, and entered into an oral agreement urgently where it was necessary to obtain the files from the previous solicitors. It was submitted that he was aware that the solicitor had to sort and collate the files and could not provide a formal client agreement until this had occurred, and that he had worked with the solicitor in obtaining the files and in continuing the conduct of the litigation. These circumstances suggest that it may well have been appropriate to have postponed compliance with the disclosure obligations until the matters which had to be dealt with more urgently had been dealt with, but at some point the urgency of the matter must have subsided to such an extent as to permit the solicitor to give appropriate attention to the statutory obligations in relation to disclosure.
- [29]As to the question of whether oral disclosure was sufficient, or substantially sufficient, in my opinion there are at least two significant reasons why it is important for a solicitor to comply with the statutory obligation to provide the required disclosure in writing. The first of these is to avoid future argument as to whether any and what disclosure has in fact been provided orally. The second is that the matters which have to be disclosed are likely to be fairly complicated, and it is going to be difficult for the typical lay client to absorb those matters effectively simply on the basis of an oral exposition, even if comprehensive. Admittedly, there will be some clients for whom the provision of written materials will be essentially unhelpful, and the position will be different in their case. But in the ordinary case, providing written materials will enable the client to consider the matters disclosed in them at some length, so as to give sufficient time properly to absorb them, and to consider their implications for the retainer. The legislature has evidently taken the view that, at least in the ordinary case, it is appropriate that clients have the benefit of this advantage, and in those circumstances I do not think it can be said to amount to substantial compliance with the statutory obligation to provide oral disclosure. The position is not such that it could be said that no real penalty should be imposed in such circumstances because of a failure to provide disclosure in the form required by the statute, namely in writing.
- [30]It is not to the point that the client has some experience in litigation, or indeed has previously retained other solicitors who presumably complied with their disclosure obligations. The solicitor in this case was in no position to confirm that they had, and in any event what was required to be disclosed by the other lawyers involved may well have been quite different, because what was proposed by them may well have been different. Accordingly, I do not think the solicitor can rely on any disclosure by any other solicitor to the client.
- [31]The other matter relied on was that on 15 April 2009 the applicant signed a client agreement said to be fully compliant with the requirements of the Act. It is I think sufficient to say that, whatever a reasonable time was after the commencement of the retainer, that had long since expired by 15 April 2009. The costs assessor seems to have proceeded on the basis that whatever happened on 15 April 2009 could not amount to disclosure for the purposes of the Act, and I can only agree. Disclosure in April 2009 was not disclosure as required by s 310(1) of the Act.
Retrospective effect of client agreement
- [32]The next issue before me is whether the client agreement entered into in April 2009 did and could validly apply to the whole of the retainer from when it was originally put in place. It is necessary to distinguish here between two situations. Ordinarily, if two parties to a contract agree by that contract that the relationship between them for the purposes of the contract is to be taken as having commenced on a particular day, from then on it may well be that as a matter of contract they are bound to proceed as if the contract had in fact come into force on that day, even if that day was a date prior to the date when, in accordance with ordinary legal principles, a contract came into existence between them.
- [33]Parties can agree between themselves that they will arrange their affairs on a basis which amounts to an historical fiction, but that does not mean that the fiction is to be treated as having been what really happened for any purpose where what matters is what actually occurred between the parties, rather than what the terms of their agreement are. That is usually what matters for a statute. Hence, in circumstances such as the present, even if the parties on 15 April 2009 agreed that as between themselves they were to be treated as if the disclosure contained in the document had been made at some time in the previous year, that would not mean that a statutory obligation in relation to disclosure which required something to be done in the previous year which had not in fact been done at that time would have been retrospectively complied with.
- [34]So far as there is any question of whether the requirements of the Act have been complied with, what matters is the actual situation that existed from time to time between the parties, not the terms of any contract which was ultimately entered into between them. That would be the case even if the contract on its face expressly had retrospective effect. Legislation can in effect change history, though even then the practical consequences of retrospective statutes are that, after the statute has been passed, for the purposes of what is to occur thereafter, the consequences of past acts are to be taken to be different from what they would have been in accordance with the law at that time.
- [35]The April 2009 agreement with the disclosure document is in evidence.[4] The date of the signatures of the applicant and the respondent is 15 April 2009 and the date of the disclosure notice was 14 April 2009, although an acknowledgement that it had been read and understood was signed by the applicant and dated 15 April 2009, and by the respondent. The agreement, described as a “work plan”, identified in Clause 3 the work, being the work the solicitors were instructed to perform, as involving 15 stages. Stage 1 was:
“Take instructions on an urgent basis, including meeting with client on the weekend, formulate advice about uplifting file from former solicitor, draft authorities as appropriate, draft appropriate communications to former solicitor requesting release of file and other communications as necessary.”
- [36]This is the same as Stage 1 in the work plan attached to the letter of 23 September 2008 by the respondent to the applicant. It was completely inappropriate for the situation in April 2009. In addition, Stages 2 and 3 were the same as Stages 2 and 3 in the earlier work plan, Stages 5-12 were the same as Stages 4-11 in the earlier work plan, Stage 13 was the same as Stage 12 except that what was assumed in the earlier document to be a one-day hearing had become a 10‑day hearing, and Stage 15 was the same as the earlier Stage 13. Stage 4 and Stage 14 were new; the former was “advising client in relation to disclosure, drafting list of documents, filing and serving list of documents.” It seems to overlap to some extent Stage 5: preparing list of documents including sorting through and tidying file. Stage 14 was: “drafting appropriate offers, perusing counter offer, negotiating generally, documenting any settlement including necessary advices.” This seems to have been entirely new. This part of the document therefore does appear to assume that the agreement was intended to cover all of the work done by the solicitor from the time when instructions were first received to take over the file from the previous solicitors.
- [37]Apart from the content of the stages of work identified in the work plan, there is nothing stated expressly in the costs agreement to indicate whether or not the agreement applied retrospectively, in the sense that it was to cover all of the work done in relation to the partnership dispute from the time instructions were first received. However, I do not think that it requires the implication of a term into the agreement in order to give it that operation. The issue is the correct interpretation of the document as it stands. There are I think two indications that it applied as from the time when instructions were first received in relation to this dispute: the work plan covered all of the work from that time, and this was the first written costs agreement in relation to that work which had been entered into by the parties. The former comes from the terms of the document, and the latter would be a background fact necessarily known by both of the parties.
- [38]Indeed, it appears that the agreement came into existence after the solicitors had refused to act further because of some conduct on the part of the client, and the client had then entered into this agreement in order to secure the continuing services of the solicitor. Those were also objective facts as to the context of this agreement which would have been known to both parties at the time. The only indication to the contrary is that it is perhaps a little surprising that, in respect of some parts of the work plan which had obviously been completed by 15 April 2009, the “estimates” of the costs of doing the work were expressed as round figures, or ranges of round figures, when it ought to have been obvious what amounts could be charged under this agreement for that work because it had already been done. Possibly, it had not actually been costed at that stage.
- [39]On the whole therefore, as a matter a construction, I conclude that this agreement did cover all of the costs from the time the retainer in relation to the partnership dispute was first entered into, unless the terms of the Act prevent a costs agreement from having this operation. This follows from the terms of s 319(1)(a), that legal costs are recoverable under a costs agreement made under Division 5 or the corresponding provisions of a corresponding law, otherwise the costs are recoverable under the other paragraphs. I can find nothing set out expressly in Division 5 which prevents a costs agreement from operating retrospectively, and it would be unsurprising that a costs agreement might in some circumstances operate retrospectively, for example where there was an urgent need for legal work which might have to be done before there was time for the disclosure obligations and a written costs agreement to be entered into between the parties.
- [40]The Act expressly contemplates that circumstances may require some legal work to be done before there is time for proper disclosure to be made, and in those circumstances it would be unsurprising if there was no express prohibition on some retrospective operation for a costs agreement. Section 326 provides that subject to Division 5 and Division 7 a costs agreement may be enforced in the same way as any other contract, which suggests that, expect for the matters dealt with expressly in those divisions, the ordinary principles of contract law apply. Division 7 is concerned with the process of costs assessment, and there is nothing in that division which prevents a costs agreement from operating retrospectively. The costs agreement entered into in April 2009 has not been set aside by a court having jurisdiction to do so, either under s 328 or otherwise. On the face of it therefore the agreement was of retrospective operation.
- [41]The difficulty for the solicitor, however, is that under s 316(1) of the Act if there has been a failure to comply with the disclosure obligations the client need not pay the legal costs unless they have been assessed under Division 7, and Division 7 includes s 340, which requires the costs assessor to assess disputed costs subject to a costs agreement by reference to the provisions of the costs agreement unless the assessor is satisfied that the costs agreement does not comply in any material respect with the disclosure requirements of Division 3. That was the case with the April 2009 costs agreement, because it did not comply with the requirement as to timing of disclosure in s 310(1), and that was in my opinion a non-compliance in a material respect. It follows therefore that s 340(1) was not satisfied and the costs assessor was not required by that section to assess the disputed costs by reference to the provisions of the costs agreement. Accordingly, it was appropriate to assess them by reference to s 341, including subsection (1)(c).
- [42]The difficulty which arises at this point is that the costs assessor assessed the itemised bill in relation to the partnership dispute, and indeed the other two itemised bills, on the basis that s 319(i)(b) of the Act was applicable, and that the applicable scale of costs was the Supreme Court scale. If there was a costs agreement which satisfied s 319(1)(a), then that approach was inappropriate, because, assuming that that is an applicable scale, it was not the case that paragraph (a) did not apply. That, however, is subject to the requirement in s 316(1) that, because of the failure to make proper disclosure, the costs have to be assessed under Division 7, and under Division 7 the applicable provision was s 341(1) rather than s 340(1). It seems to me that the effect of s 340(1)(c) is to provide that when costs are being assessed under Division 7, they are not to be assessed by reference to the provisions of the costs agreement, but simply by reference to the fairness and reasonableness of the amount of legal costs in relation to the work. However, s 319(1)(a) is not subject to compliance with the disclosure requirements of Division 3, so paragraph (a) was not excluded, so that it applied and paragraph (b) did not apply.
- [43]The costs assessor assessed the bill for this matter on the basis that s 319(1)(b) applied, so it was assessed against the Supreme Court scale. Whether that was correct depends on whether s 319(1) applies by reference to the state of things at the time the work is done, or whether there can be a costs agreement which covers the costs for work already done. There is nothing in s 319 itself which throws any light on this issue, but the reference to the agreement being made under Division 5 suggests that the latter is correct because as I have explained that Division does not exclude an agreement with a retrospective operation. Section 319(1)(c) matches s 341(1)(c), as is shown by the rate in s 319, but s 341(1) does not refer to assessment under an applicable scale of costs. This is curious, but on the face of it Division 7 does not make provision for assessment when s 319(1)(b) applies. I suppose the effect of the provisions is that costs are recoverable under the scale pursuant to s 319(1)(b), but subject to the test of fairness and reasonableness of the costs in relation to the work in s 341(1)(c).
- [44]In the present case, once the April 2009 agreement was made s 319(1)(a) applied to the legal costs for the work covered by it, but because of the activation of s 340(1)(c) the costs were not to be assessed by reference to it. It follows that the costs assessor should have assessed under s 341(1), including para (c), but not specifically by reference to either the costs agreement or the Supreme Court scale. I am not persuaded that the order made by the other judge on the reference involved impliedly a decision to the contrary. It follows that the whole process of assessment for the partnership dispute miscarried: what the costs assessor should have done was to assess that part of the original itemisation that applied to the partnership dispute under s 341. Because that was not done the costs assessor erred, and that assessment must be done again, under s 341.
Applicable scale of costs
- [45]There is also the issue, which applies in relation to the other bills of costs, of whether the scale for costs in Schedule 1 of the UCPR, which is a scale of costs for the Supreme Court, is an “applicable” scale of costs for the purposes of the Act. It is on its face a scale of costs for assessing costs on the standard basis: r 691. There had been some discussion in the cases of this question. In Herald v Worker Bee (Brisbane) Pty Ltd [2004] 2 Qd R 263 at 265 Fryberg J said, in obiter, that the scales in the schedules to the UCPR did not apply to an assessment of costs between solicitor and client, because of the terms of r 678 as it then stood. That was in a matter where the issue was as to the requirements for disclosure under earlier legislation and the effect of a failure to comply with a particular provision. In Gilbert v Kozicki [2007] QSC 268 A Lyons J applied this reasoning and decided that the scales in the schedules to the UCPR did not apply for the purposes of a provision in the earlier Act which was essentially the same as s 319(1) of the Act: [46].
- [46]In Bannerot v Waddington [2008] QDC 332 I gave some consideration to these decisions, in a passage which was also obiter: [5] – [13]. I will not repeat what I said there, about which it is again unnecessary to arrive at a decision, since the legislative provisions have moved on since then. Fryberg J based his reasoning on the then terms of r 678, which was amended as from 10 December 2007 to provide expressly that “Part 2 [of Chapter 17A] applies to costs payable or to be assessed under the Legal Profession Act 2007 only if section 319(1)(b) of that Act applies to the costs”. Rule 691, which provides for the assessment of costs on the standard basis by reference to the scales in the schedules, is in Part 2 of that chapter. There is also a note to r 678 saying: “The Legal Profession Act 2007, section 319(1)(b) applies to costs that are recoverable under the applicable scale of costs, rather than under a costs agreement.” So far as the rules are concerned, therefore, the clear intention is that the scales in the schedules will be used when s 319(1)(b) applies.
- [47]Apart from that, the Act contains in s 300 a definition of “scale of costs” as including “the costs for a court prescribed under the Supreme Court of Queensland Act 1991 in relation to a matter.” That description covers the scales in the schedules to the UCPR even though the rules proceed on the basis that the scales are prescribed by the rules for use for the purpose of assessment of standard costs rather than costs between solicitor and client, because it covers a scale prescribed in relation to a matter, regardless of the purpose for which it is prescribed. It is reasonable to infer that the legislative intention in 2007 was to overcome the situation that had apparently arisen from the reasoning of Fryberg J.
- [48]It follows that I consider that, from the commencement of the Act, the position has been that the scales in the schedules to the UCPR are applicable scales for the purposes of s 319(1)(b), and the costs assessor did not err in using them for the two assessments which involved or would involve a matter in the Supreme Court. Strictly speaking they represent a limit on the amount recoverable, because although s 319(1)(b) limits the amount recoverable to the scale amount, s 341(1)(c) still requires the costs assessor to consider the fairness and reasonableness of the amount of legal costs in relation to the work. It is perhaps not entirely clear that the costs assessor did this with these bills, but there was no complaint from the applicant that the assessments of these bills was too high, so there is no reason to interfere with them.
Reduction under s 316(4)
- [49]It was also submitted for the respondent that the assessment had produced a double penalty for the failure to make proper disclosure, in that the bills were assessed by reference to the Supreme Court scale, which reduced the amount payable, and also the amount allowed for care and consideration had been reduced to 20% because of the failure to make disclosure. There was a penalty in that the assessment was conducted on a standard basis. This last point I think is really without substance, or at least of no significance in addition to the point that there was a penalty involved in assessing by reference to the Supreme Court scale, since that is the effect of such an assessment.
- [50]As to the reduction of care and conduct to 20%, there had been an objection on the ground that the percentage claimed in respect of care and conduct was excessive. It is not clear that the costs assessor would have allowed the full percentage claimed but for the failure to make disclosure, so that the reduction to 20% was just for the reason that there had been a failure to make disclosure. The care and conduct item is in effect an additional amount over and above the amount payable pursuant to the other items, which is payable because there are some costs which are not caught by the specific items, as indicated by the exposition in the item in the schedule about the content of care and conduct, and because it is recognised that in more difficult or demanding matters some loading should be applied. Hence, the percentage allowed can vary depending on the nature of the work done, and the extent to which there are special circumstances which make a matter more difficult or more demanding than a typical matter in the Supreme Court. I think it would have been useful to know what amount the costs assessor would have allowed for care and conduct had it not been for the failure to make disclosure.
- [51]To some extent the double penalty arises from the legislation itself. The effect of s 340(1) is that a costs agreement does not count for that section if there has been a material failure to comply with the disclosure requirements. It follows, however, from s 316(4) that there is an additional power to reduce the amount otherwise payable by the client by an amount considered to be proportionate to the seriousness of the failure to disclose. There is nothing in s 316 to indicate that the provisions in the different subsections are to be applied in the alternative, that is to say, that so long as a “penalty” is imposed under one of the subsections, no penalty can be imposed under another. Indeed, since the “penalty” imposed under subsection (1) applies anyway, saying only one penalty could be imposed would necessarily mean that subsection (4) could never operate. There is also the consideration that subsection (7) obviously applies as a potential additional penalty in respect of any legal practitioner who fails to make proper disclosure. It seems to me clear, therefore, that the Act contemplates that there may be multiple penalties imposed for failing to make proper disclosure, and the mere possibility of this, or even showing that it has arisen in a particular case, would not mean that the assessment had not been properly undertaken in accordance with the Act.
- [52]Because of what I have already decided, this issue has become academic, but I will say something on a provisional basis. Assuming that the whole of the reduction was attributable to the penalty imposed because of the failure to make disclosure, that means that this specific penalty was in effect 10% of the itemised costs. That is a significant amount, particularly in a context where the costs are otherwise being assessed on the standard basis rather than under a costs agreement, but it seems to me in principle that it was open to the costs assessor to exercise this statutory discretion. The reduction strikes me as reasonably proportionate to a significant failure in the disclosure obligation, and there is no particular reason to think that this reduction was not a matter properly within the discretion of the costs assessor. It has not been shown that the costs assessor proceeded on the basis of any misunderstanding of the relevant facts, or on the wrong legal basis, nor has it been shown that there was any other factor which would vitiate the discretion.
- [53]A reduction in this way of in effect 10% of the costs otherwise payable is not obviously disproportionate, and I think understandable for what were fairly significant failures to comply with the disclosure regime. In any event, it is I think sufficient to say that I am not persuaded that the exercise of the discretion in this respect on the part of the costs assessor miscarried, or that there are any grounds on which it would be appropriate for this court on a review to interfere. It is not a question of what I think is the appropriate reduction, if any, but whether the costs assessor has been shown to be wrong. I am not persuaded that he has in this respect. Nevertheless, it follows that this issue does not affect the outcome.
- [54]Accordingly, two of the costs assessments have not been shown to be in error, and on the review they are confirmed. But the assessment of the partnership dispute bill, which produced the first of the certificates referred to earlier, having been conducted on the basis of assessment under the Supreme Court scale, which involved an error on the part of the assessor, must be set aside. I assume that the matter must go for re-assessment, but I will hear submissions as to the form of my final order before it is made.
Footnotes
[1] The order as entered (Document 14 on the file) says “the bills of costs”. However, the endorsement of his Honour’s associate says “the bill of costs” and what is exhibited to Mr Smith’s affidavit is a letter of 21 October 2009 to the solicitor for the applicant enclosing “the itemisation requested” referred to in that affidavit as an itemised bill of costs. That itemisation starts at p 3 of the exhibit and continues to p 29. The date of the first item is 7 June 2008, and the last 2 July 2009.
[2] The test in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 was not met.
[3] Affidavit of Ricketts filed 27 July 2010 Exhibit BPR-03.
[4] Affidavit of Hallewell filed 3 May 2011, Exhibit AHA-1.