Hartnett Lawyers v Chapman[2017] QDC 110

DISTRICT COURT OF QUEENSLAND

Background

1. [1]
   On 17 September 2014 the appellant forwarded to the respondent a letter and an initial Costs Agreement for work to be done in relation to the Will of the respondent’s late husband and his estate.^[1]The respondent returned the signed initial Costs Agreement on 18 September 2014. The respondent affirms she was never informed by the appellant that she should seek independent legal advice in relation to the initial Costs Agreement^[2].

2. [2]
   On 24 September 2014 the appellant forwarded to the respondent a further letter and a Costs Agreement – Variation which the respondent signed and returned.^[3]The respondent affirms she was never informed by the appellant to seek independent legal advice in relation to the Costs Agreement – Variation^[4].

3. [3]
   On 7 May 2015, the appellant sent the respondent a letter and Costs Agreement – Further Variation which the respondent signed and returned. Over the following months, the appellant sent 9 tax invoices for legal costs and outlays to the respondent, the first dated 30 September 2014 and the last dated 11 May 2015. It is to be noted the first invoice was sent after the respondent had signed the Costs Agreement – Variation.

4. [4]
   On 5 August 2015, the respondent’s present solicitors wrote to the appellant advising the respondent was changing solicitors, and requested the appellant supply itemised bills for the 9 invoices. The appellant sent correspondence to the effect the invoices were sufficiently itemized.

5. [5]
   On 24 September 2015, the respondent filed an application for assessment of costs, and an order for delivery of itemised bills.

6. [6]
   On 8 October 2015, one day prior to the hearing of the application, the respondent provided written submissions to the appellant, which advanced the argument that the Costs Agreement – Variation was in fact a Conditional Costs agreement which did not comply with the requirements of s 323 Legal Profession Act 2007 (LPA) and that the Agreements were accordingly void. The application proceeded in the Magistrates Court on 9 October 2015. The respondent to this appeal requested the Magistrate consider a number of issues including whether the Costs Agreement – Variation was void. The appellant’s counsel did not object to the Magistrate hearing submissions on this issue, as well as whether the appellant had supplied sufficiently itemized bills to the respondent.

7. [7]
   On 19 October 2015 the Magistrate delivered judgment. The Magistrate ordered the appellant’s tax invoices be assessed and she appointed a costs assessor. In her Reasons for Judgment the Magistrate considered the issues raised by the respondent at the hearing of the application. She summarized the issues as follows:

1. Whether the Costs Agreement entered into between the parties as varied by the first Cost Agreement – Variation was a Conditional Costs Agreement within the meaning of that term as used in the Legal Profession Act 2007 (“LPA”).

2. If the Costs Agreement as varied was a Conditional Costs Agreement, whether the agreement was void for non-compliance with requirements of the LPA and whether the court had the power to make findings in relation to the invalidity of the Costs Agreement.

3. Whether the tax invoices delivered by the appellant were itemised bills within the meaning of that term as used in the LPA.

4. In the event that the invoices the subject of the application were not itemised bills, whether it was appropriate for the court to order the respondent deliver itemised bills.^[5]

Magistrates Findings

8. [8]
   The Magistrate determined the Magistrates Court had jurisdiction to make findings in relation to the invalidity of the Costs Agreement. She considered the Magistrates Court was empowered, pursuant to r 743G of the Uniform Civil Procedure Rules 1999 (“UCPR”), to consider whether any Costs Agreement is void. She found the Costs Agreement - Variation was a Conditional Costs Agreement. She considered the Agreement was void by operation of law for non-compliance with s 323 of the LPA.

9. [9]
   The Magistrate determined the bills were not itemised, which was in breach of s 332 LPA,  and the appellant was therefore obliged to comply with its legal obligations to provide itemised bills.^[6]

Appeal

10. [10]
    The appellant submits the Magistrate erred in making findings on the above questions and as a consequence the Magistrate’s discretion miscarried. The appellant seeks the orders made by the Magistrate be set aside or varied in the manner set out in the Notice of Appeal.

Procedural Fairness

11. [11]
    There is one preliminary matter to dispose of before considering the appellant’s grounds of appeal. The appellant submits that the Magistrate should not have determined the above issues, because the respondent did not give notice to the appellant, until one day before the hearing, it intended to challenge the validity of the costs agreement, and submit the Magistrate had the jurisdiction to determine the issue of the validity of the costs agreements summarily. The appellant submits that the respondent raised this issue without proper notice.

12. [12]
    There is no merit in the appellant’s complaint about lack of procedural fairness. Experienced counsel who appeared for the appellant at the original application, informed the court he was aware of the issues raised in the respondent’s written outline of submissions. He neither requested an adjournment of the application, nor objected to the Magistrate considering the issues. Counsel for the appellant indicated he was prepared to address all issues raised by the respondent in oral submissions. He submitted the Magistrate had no jurisdiction to find the contract was void, and made comprehensive oral submissions as to why the contract was a not conditional contract, and therefore not void. Counsel’s oral submissions on the application were consistent with those now argued on this appeal^[7].

Is the Appeal competent?

13. [13]
    Another preliminary issue is one raised in oral argument by the respondent during the appeal hearing. The respondent submits the appeal is incompetent because the actual order made by the Magistrate on 21 October 2015 is limited to an order for the tax invoices to be assessed, the name and rates of the appointed cost assessor and an agreed order that costs be reserved. The respondent submits that the Magistrate made no specific order that the cost agreements were void, or that the bills were not itemised. The respondent referred to the appeal provision, s 45(1) of the Magistrates Court Act 1921 which refers to the right to appeal a “judgment or order” of a Magistrates Court.

14. [14]
    In my opinion the appeal is not incompetent, though the submission does identify two errors that were made by the Magistrate. The Magistrate having determined that the cost agreement as varied was void, that ought to have been reflected in the formal order made. This could have been done by making a declaration to that effect, or simply by ordering that the costs be assessed under s 341 LPA on that basis. It is important that the formal order deal with the matters that the court was called upon to determine in the application, either by granting the relevant relief or by refusing it, and in my opinion it was an error of law on the part of the Magistrate to have failed to do so.

15. [15]
    The Magistrate was dealing with an application for an assessment of costs and for a direction for the delivery of itemised bills, a direction which can be made under r 743C UCPR. The court having held that there were no itemised bills, it was appropriate to direct that itemised bills be prepared, filed and served, if the costs were to be assessed, so that the costs assessor would have the benefit of itemised bills on the assessment. Obviously a cost assessment is going to be much more difficult if there are no itemised bills available for assessment. For practical purposes, any costs assessor is going to give effect to the findings made by the Magistrate, and it is appropriate that a costs assessor do so. But if findings are wrong, there would need to be opportunity to challenge them on appeal. A court cannot make its decisions partly appeal-proof simply by erroneously omitting from the formal order of the court that part which is contentious. The reason for the rule that one cannot appeal against reasons, only against judgments or orders, is that, to submit to an appellate court that there should be a finding that the appellant has been successful (or unsuccessful) for the wrong reason is to invite the appellate court to give an advisory opinion, rather than review and determine a matter in fact in dispute between the parties. In the present case, there is a matter in fact in dispute between the parties as to the issues sought to be agitated in the appeal.

Jurisdiction

16. [16]
    The appellant submits the Magistrate had no jurisdiction to decide the proper construction and validity of the Costs Agreement – First Variation. The appellant submits the issue as to whether the Agreements were void was a proper matter to be tried and resolved by way of a declaration, which was outside the Magistrate Court’s limited equitable jurisdiction under s 4 Magistrates Courts Act 1921.

17. [17]
    The appellant also submits the Magistrate erred in her conclusion that she was empowered by r 743G UCPR to consider whether any Costs Agreement is void.^[8]The appellant referred to Reid DCJ’s findings at para [24] in Sunba v Hartnett Lawyers [2014] QDC 34, where he determined that r 743G does not empower a Magistrate to make an order relating to the delivery by a solicitor to a client of documents to which the client is entitled. His Honour contrasted the power of the District Court to make such an order, pursuant to s 68(1)(a)(2) of the District Court of Queensland Act 1967. The appellant submits the Magistrate under r 743G was similarly restricted, and was only empowered to consider whether the issue of validity of the Agreement ought to be determined prior to the making of an order for costs assessment. The appellant submits the effect of Sunba’s Case is that the Magistrate was only empowered to make directions for the issue to be resolved by trial, and was not empowered to determine summarily the issue which was in effect a declaration beyond the jurisdiction of the Court.

18. [18]
    The appellant submits that although the Magistrate did not make a formal order regarding the Costs Agreement being void, the Magistrate’s finding effectively bound the appellant and respondent to her determination when the costs assessment was later carried out, and that this was an error made by the Magistrate. The appellant submits that this determination should be set aside to allow for a direction for the formal resolution of the issue of the Costs Agreement’s validity by a trial in the Supreme Court.

19. [19]
    The respondent submits that the Magistrates Court was “the relevant” Court under r 743G(1) UCPR, and therefore the Magistrate had jurisdiction to hear and determine the respondent’s application, including the court determining whether the Costs Agreements were void.

Consideration

20. [20]
    Rule 743G UCPR relevantly states:

“Directions hearing

3. (1)
   The relevant court may hold a directions hearing in relation to an application for a costs assessment.

3. (2)
   At a directions hearing, the relevant court may consider the following matters—

4. (a)
   ….

4. (d)
   whether it is appropriate for any question to be tried before the costs are assessed, including, for example—

1. (i)
   whether a person claimed to be liable to pay costs is liable to pay those costs; and

2. (ii)
   whether any costs agreement relied on by the lawyer concerned is void; and

3. (iii)
   whether the lawyer concerned was negligent; and

4. (iv)
   whether the lawyer concerned was in breach of the contract of retainer; and

5. (v)
   whether the lawyer concerned acted without the instructions of, or contrary to the instructions of, the client;

5. (e)
   whether anything else should be done before the costs are assessed.

3. (3)
   Also, the relevant court may—

1. (a)
   if the grounds of dispute relate only to the amount of costs—order that a particular costs assessor be appointed to carry out the costs assessment; or

2. (b)
   otherwise—order that the application be heard by the relevant court.” [emphasis added]

21. [21]
    The question is not whether the Magistrate has jurisdiction to grant a declaration as an equitable remedy, but whether the Magistrate had jurisdiction to decide whether the costs agreement was void under the LPA, or should leave that question to the costs assessor.  I am of the view that the former is the correct position, and that flows from the terms of r 743G of the UCPR.  This is consistent with the conclusion reached by McGill DCJ in Paroz v Clifford Gouldson Lawyers [2012] QDC 151. At [6] McGill DCJ stated:

“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.” 

22. [22]
    The issue in Sunba v Hartnett Lawyers (supra) was whether an application seeking various relief in relation to costs was properly brought in the District Court, where that court was not the “relevant court” for the purposes of r 743A UCPR. The issue was complicated by the fact that the applicant also sought to have the costs agreement set aside under s 328 LPA, which only the Supreme Court or QCAT can do. It was submitted in that case by the applicant that the Magistrates Court did not have power to order delivery of the file, and preparation of itemised bills. Reid DCJ held that it was unnecessary to decide the latter point because it would be more appropriate for the application under s 328 LPA to be heard and determined first, but did find that the Magistrates Court did not have power to order the return of the file, and made such an order before transferring the proceeding to the Magistrates Court under s 28 of the Civil Proceedings Act 2011. The proposition that r 743G UCPR does not give a Magistrate power to order the return of the file in an application under s 335 LPA is different from the issues in this matter, and raised the question of whether that court on that application had power to override the solicitor’s lien.

23. [23]
    It is important to bear in mind that the effect of a failure to comply with the requirements of Division 5 LPA is that the costs agreement in question is void pursuant to s 327(1) LPA. The effect of an analogous provision in earlier legislation, s 48F  Queensland Law Society Act 1952, was considered by the Court of Appeal in Casey v Quabba [2007] 1 Qd R 297, where the court held that, in that provision, “void” meant “void”. It follows that it is not necessary for a party to the agreement to avoid it, nor for there to be an order of a court setting it aside, as can occur under s 328 LPA, where the agreement is valid unless and until the Court or Tribunal makes the order.

24. [24]
    In Casey the issue arose not between solicitor and client but between party and party, where a party having the benefit of an order for costs assessed on the indemnity basis sought to have the costs agreement taken into account in the assessment, and the party liable to pay the other party’s costs sought to challenge the validity of the costs agreement on the basis that it was void under that section. Williams JA with whom the other members of the court agreed held that the Registrar who was assessing the costs under the system then in operation had the power to decide that question, but in fact the Registrar in that case had referred the question to a Judge, as the Registrar could do under the rules, and it was said that the Judge had all necessary jurisdiction to determine the matter.^[9]

25. [25]
    In the present case, if the issue arose on an assessment ordered by a Magistrate, that decision would be authority for the proposition that the costs assessor had power to decide the question, or to refer the question to a court, the Magistrates Court, for determination under r 717(2) UCPR^[10]. In this context, it is difficult to see why a Magistrate should not be able to decide the question in advance, and that is consistent with terms of r 743G UCPR. It is quite unsatisfactory if the matter can only be decided on a review of the costs assessor’s assessment, as any error would require the whole assessment to be done again.^[11]

26. [26]
    I therefore consider the Magistrate had jurisdiction in the present case, under r 743G to determine whether Costs Agreements were void before referring the matter to the assessor. Further, the Magistrate had affidavit evidence from the respondent, which was uncontested by the appellant, as well as copies of the Cost Agreements, and tax invoices. It is difficult to imagine what other evidence the Magistrate needed to determine the issue, which was primarily one of construction of relevant clauses of the Cost Agreement – Variation. Experienced counsel for Hartnett Lawyers who appeared in the Magistrates Court did not file any documentary evidence relevant to the application, or seek an adjournment to produced further evidence.

Is the Costs Agreement – Variation a conditional costs agreement?

27. [27]
    The appellant submits the Magistrate ought to have held the Costs Agreement – Variation was a Deferred Costs Agreement and not a Conditional Costs Agreement, and therefore she erred in determining the Costs Agreement was void.

28. [28]
    It is useful to set out some of the relevant clauses of the Costs Agreement – Variation:

“Deferred payment of fees

4.4 Payment of fees will not be required until the first to occurof the following events:

1. (a)
   You reach agreement with the Executors of the Estate in relation to the distribution of the Estate and/or ownership and management of the Business;

2. (b)
   You receive payment from a life insurance policy held by Peter and/or superannuation policy;

3. (c)
   Hartnett Lawyers ceases to act for you in this matter.

however the Firm will render invoices or statements from time to time to inform the Client of costs.

4.5 If this Agreement is terminated then payment of all costs outstanding to the Firm will be required at the time of that termination.

4.6 You have the right in accordance with the Legal Profession Act 2007 (Qld) to obtain independent legal advice for entering into this agreement. You also have the right to a cooling off period of five clear business days after we receive the signed agreement from you during which you may terminate the agreement by written notice to us. Should you so terminate the agreement we are still entitled to charge you for legal services performed on your instructions with your knowledge before the termination.

4.7 This legal practice will charge you as set out above. An uplift fee of 25% on the professional fees usually charged is payable when fees become payable in accordance with this Agreement.”

Consideration

29. [29]
    There are two crucial issues in relation to the correct interpretation of this agreement, as the matter was argued. The first is the true meaning of cl 4.4(c); the second is the true meaning of cl 4.7. The former uses the expression “in this matter”, which directs attention to the “matter” in which the appellant was to act.^[12]Initially, a letter from the appellant to the respondent dated 17 September 2014 referred to the work to be performed in the following terms:

“Provide you with initial advice regarding your rights in relation to the estate of the late Peter John Chapman and liaise with yourself, the solicitors for the estate and any other parties necessary to obtain relevant information regarding the status, progress, value and administration of the estate and including any necessary searches and attendances as may be required to protect your rights as a potential beneficiary (not including any resultant litigation as may be necessary).”

30. [30]
    This letter was forwarded with a disclosure and costs agreement which said, in cl 2.3, “The firm agrees to perform the work set out in this costs agreement…” Clause 2.5 identified this as the work detailed in the letter of 17 September 2014. On 24 September 2014, the appellant in a letter to the respondent sent by email forwarded the variation which substituted for cl 2.5 a statement that the firm will perform work for the client “as detailed in a letter from the firm to the client dated 24 September 2014”. The letter of 24 September 2014 does not appear to identify, with any detail, the work to be performed for the client, although it does, in the context of giving an estimate of further costs, refer to:

“Reviewing the additional documentation requested from Bell Legal Group, attending the meeting on 25 September 2014 and advising you further on your rights in relation to the estate and the offer put to you by the executors (but excluding any family provision application).” 

31. [31]
    The appellant forwarded a further letter on 7 May 2015 pointing out that an application had been filed in the Supreme Court, notwithstanding that the earlier letters did not contemplate costs associated with litigating the proceeding. The letter also stated that the costs estimate provided previously had been exceeded. That was an understatement. The initial estimate of costs was $6,380, and in the second letter there was an estimate of additional costs of between $5,000 and $7,500. Prior to the third letter of 7 May 2015 being sent, the appellant had already billed costs in excess of $100,000.^[13]In the circumstances, although this was not a matter referred to in submissions, if there was no intermediate disclosure it appears to be indisputable that the appellant was in breach of s 315 LPA, for a substantial period.^[14]

32. [32]
    The letter of 7 May 2015 then referred to the further work required as falling into two broad categories: complying with the order made 17 April 2015 and carrying the matter to the mediation contemplated in para 8 of the order, and work required to advance to the matters identified in para 30 of a particular letter to the client, being the matters identified in counsel’s opinion as relevant to her position. The work referred to in the former category was set out in more detail, and an estimate of costs of $17,000 to $36,000 was provided, though this carried the litigation only up until the end of the mediation. There was no estimate provided in the letter in relation to the second category of work; presumably this was intended to be work done to carry the matter forward in the event that the mediation was unsuccessful. One of the clauses substituted in the agreement by the second variation, cl 6.2, contained an estimate of the total fees, expenses and disbursements to complete “the work” including the additional work as detailed in cl 2.5, at $122,000 to $141,000.

33. [33]
    Just what this “additional work” relates to is not clear from cl 2.5 of the varied agreement. It may be a reference to the second “broad category” of work identified in the letter of 7 May 2015, or all work necessary to complete the proceeding. I note that cl 6.1 gives an estimate of “the additional fees, expenses and disbursements to complete the additional work” detailed in cl 2.5, the range of which corresponds to the range set out in the letter for the first broad category of work, to which an allowance for GST has been added. The practical effect of this is twofold. First, it is difficult to work out, from the agreement and the letter, exactly what the various estimates relate to. Second, it is at least difficult, if not impossible, to identify just what it was that the appellant had to do in order to “complete the work”. In these circumstances, it is inevitably difficult to identify just what was meant by the expression “this matter” in cl 4.4(c) when it was inserted by the first cost agreement – variation in September 2014. It cannot be a reference to “the matter” in the sense of the proceeding in the Supreme Court, because in September 2014 that proceeding had not been filed, and the then current retainer expressly excluded any such court proceeding, as set out in the letter of 24 September 2014.

34. [34]
    It was submitted for the appellant that clause 4.4(c) simply referred to whenever the appellant stopped working for the respondent under the agreement, but that is not the natural reading of the words used. I consider the notion of lawyers “ceasing to act in this matter” implies some continuity in “this matter” after the lawyers cease to act. It refers to a situation where the matter continues, but the lawyers no longer act for the client. It may be noted that cl 15, deals with termination of the agreement. Clause 15.1, provides that the client may terminate the costs agreement and withdraw its instructions at any time. Clause 15.2 provides:

“The firm may terminate the costs agreement and cease to act for the client for lawful cause or if the client (does various things as set out in 8 subparagraphs of the clause).” [emphasis added]

35. [35]
    Clause 15.4 further provides that if the costs agreement is terminated by the firm or by the client, the firm is entitled to all outstanding fees, expenses and disbursements up to the termination and will be entitled to retain possession of the client’s files until payment of those fees, expenses and disbursements. Clause 15 was not changed by either the first agreement variation or the second agreement variation.

36. [36]
    Clause 4.5 speaks of the situation which applies “if this agreement is terminated,” but in a way which is consistent with cl 15.4. In any case, mere duplication is not surprising. It will be apparent from my comments elsewhere that I do not regard these agreements as well-drafted. The wording in cl 4.4(c) parallels the wording in cl 15.2, at least in relation to ceasing to act for the client, and in the context of the agreement as a whole is to be read as applying to ceasing to act under that clause. Although cl 4.4 was introduced by variation after cl 15, which was part of the initial agreement, the agreement as varied is still to be interpreted as a whole, and as a commercial contract. The principles for interpreting commercial contracts were recently summarised in the judgment of the President in Watson v Scott [2015] QCA 267 at [30] and I respectfully adopt, and am seeking to apply, that statement of principle. It seems to me that cl 4.4(c) applied in circumstances where the appellant ceased to act in accordance with cl 15.2.

37. [37]
    There is a further reason why the proposition that cl 4.4(c) was intended to apply to ceasing to act in all possible circumstances that could arise is unpersuasive. If it did, it would have been much simpler for cl 4.4 simply to state that payment of fees will not be required until the end of the retainer. Instead, three specific situations are nominated, two of which might be described as a successful outcome. Although cl 4.4(c) would not on any interpretation be described as a successful outcome, the explanation for it, in the context of a conditional costs agreement, is that set out in the reasons of the Magistrate at [17]. That is, to overcome a situation where the entitlement to costs of a solicitor whose retainer has been terminated will not arise until there is a successful outcome in the proceeding.^[15]These considerations support the interpretation of cl 4.4 as providing for a conditional costs agreement.

38. [38]
    There is also the consideration that cl 4.6 states that there is a right under the Legal Profession Act 2007 to obtain independent legal advice before entering into the agreement, and a right to a cooling-off period. Under s 323(3)(d) and (e) LPA there is a requirement for rights, in one case similar to that right, to be contained in a conditional costs agreement, but there is no requirement in the Act for such provisions to be found in a costs agreement which is not a conditional costs agreement. The assertion in the Agreement, which was drafted by the appellant that these rights exist under the LPA would only be correct if the agreement was a conditional costs agreement.

39. [39]
    It is also relevant that cl 4.7 refers to an “uplift fee”. This is a term defined in s 300 LPA as “additional legal costs, excluding disbursements, payable under a costs agreement on the successful outcome of the matter to which the agreement relates” (emphasis added). I note that the costs agreement has under the heading “Disclosure and Costs Agreement” the statement that it is “pursuant to the requirements of the Legal Profession Act 2007”, so one might expect the terms used in it to have the same meaning as such terms in that Act. In those circumstances, the proposition that an uplift fee “is payable when fees become payable in accordance with this agreement” is consistent with the notion that fees will become payable only in circumstances where there has been a successful outcome of the matter to which the agreement relates.

40. [40]
    Strictly speaking, that is not true: if fees become payable under cl 4.4(c), there would not have been a successful outcome. In those circumstances, there would be no justification for charging an “uplift fee” as defined in the Act, but nevertheless, on the interpretation that I favour, the uplift fee as defined would ordinarily be justified under cl 4.7 because the fees would have become payable under cl 4.4 in circumstances which would be characterised as a successful outcome.

41. [41]
    This leads in to the other issue, the correct interpretation of cl 4.7. I note that in the first agreement variation cl 4.2, which had set out the professional fees for various grades of practitioner and others involved in the work, was also replaced by a new cl 4.2, although it appears the only change made by the substitution was to drop the last sentence of the original cl 4.2: “As the firm charges professional fees on the conditional basis described above, the relevant court scale of fees (attached if applicable) does not apply”. In the original agreement there was nothing which could have made the professional fees charged on a conditional basis, particularly not “described above”, and the real significance of this clause is to provide a good illustration of just how badly drafted this agreement was.

42. [42]
    The second variation also substituted a new cl 4.2 which appears to precisely duplicate the earlier version of cl 4.2, as did the new version of cl 4.3. Indeed, an argument could be mounted for the proposition that the effect of the second variation was to delete from the costs agreement all those parts of cl 4 which follow cl 4.3. The second variation begins with the heading “4. Charges for professional fees, other fees, expenses and disbursements” followed by only cls 4.1, 4.2 and 4.3 which are, as far as I can see, in the same terms as the previously varied agreement. There was therefore no justification in including them in the further variation unless the function of the further variation was to delete the balance of cl 4. The operative words of the further variation agreement stated:

“The firm and the client agree that the base agreement is varied by replacing the equivalent clauses of the base agreement as follows.”

If that is the correct interpretation of the second variation agreement, it means that there is no question of this being a conditional agreement, since the clauses relied on by the Magistrate did not, after the second variation agreement, form part of the costs agreement. Nevertheless, this argument was not relied on by the appellant, so I will not consider it further.

43. [43]
    The interpretation of cl 4.7 is itself somewhat difficult. The first sentence is clear enough: “This legal practice will charge you as set out above”, that is to say, we will charge you at the rates set out in cl 4.2 for the time spent by the various persons nominated attending to your matter, and the other fees set out in cl 4.3 in accordance with that clause. But it then goes on to refer to the uplift fee of 25% of the professional fees, (i.e. - the fees chargeable in accordance with cl 4.2). The effect of the submission of the appellant was that in all possible circumstances legal fees were payable, and on the face of cl 4.7, the uplift fee was also payable. That is defined as 25% of the professional fees “usually charged”, so that the two sentences of cl 4.7 could be reconciled if the rates set out in cl 4.2 represented 25% more than the professional fees usually charged. But cl 4.2 quotes the rates as “the firm’s hourly charge rates”, indicating that such an interpretation is really not available. If the appellant’s submission is correct therefore, cl 4.7 really means:

“This legal practice will not charge you as set out above. Rather you are going to be charged 25% more than the rates set out above for professional fees.”

44. [44]
    If this difficulty were overcome by rejecting the interpretation contended for by the appellant, it would be a powerful argument for that course. There is however, the consideration that, on the interpretation adopted by the Magistrate, the only difference is that the words “if fees become payable under this clause” would be included in the above paraphrase of the clause. This clause, in my view, causes problems for the appellant whatever the true interpretation of cl 4.4, unless the term “uplift fee” is to be given its meaning as defined under the Act, so that it is payable only on the successful outcome of the matter. That however, is not easy to reconcile with the words of cl 4.7.

45. [45]
    It was submitted for the appellant that the true function of cl 4.4 was to provide that fees were deferred, that is, they did not have to be paid until the end of the retainer. It was referred to as a “deferred” costs agreement.^[16]The heading for cl 4.4 in the first variation does state “deferred payment of fees” and that was supported by the use of the word “until” rather than the word “unless” in the introductory words to cl 4.4. It is true that, in themselves, these considerations do support the interpretation for which the appellant contends, but in my opinion they are outweighed by the considerations referred to earlier. They merely demonstrate how badly drafted these clauses were. Perhaps the kindest interpretation that can be put on them is that they reflect a degree of optimism that a successful outcome would be achieved.

46. [46]
    Overall I am not persuaded by the submissions on behalf of the appellant. I consider that the Magistrate was correct, for the reasons set out above and otherwise as stated by the Magistrate, in the conclusion that this was a conditional costs agreement. The Magistrate erred only in failing to give effect to that conclusion in some appropriate way in the order that was made. I also consider that the submissions on behalf of the respondent were correct. In substance this part of the appeal fails. It seems to me that this was an opportunistic attempt by the appellant to get around the decision in Frost v Miller [2015] QSC 206, the effect of which is that a statement in terms of cl 4.6 does not comply with the requirements of s 323(3)(d) LPA. The correctness of that decision was not contested in submissions before me.

47. [47]
    That attempt has been assisted by some quite unsatisfactory features in the drafting of this Costs Agreement. Indeed, it may not have been much assistance to the appellant to establish that there was no breach of s 323 LPA because this was not a conditional costs agreement, because it seems there was at least a failure to comply with the requirements of Division 3 LPA, dealing with disclosure. I have already referred to the apparent failure to comply with s 315 LPA. It also appears that there was a failure to comply with s 313 LPA, requiring additional disclosure in the case of “uplift fees”, including a statement in writing of “the reasons why the uplift fee is warranted” something I cannot locate anywhere in the documentation. If the appellant contends that the “uplift fee” referred to in the agreement was not an “uplift fee” for the purposes of the LPA, (despite the references to the Act in the agreement), that would suggest that the appellant, by the use of that terminology in the agreement, was engaging in misleading and deceptive conduct. Section 314(1)(a) LPA requires the disclosure to the client to be “expressed in clear plain language”. It is difficult to see how the statement in cl 4.7 complied with that requirement. The Act contains a number of consequences for failure to make proper disclosure, most of them unpleasant for the legal practitioner. Apart from that, it seems to me that a reasonable argument can be made that cl 4.7 was misleading and deceptive.

Ground three – itemised bills

48. [48]
    The appellant submits the Magistrate erred by determining the bills delivered to the respondent were not itemised. The appellant relies on Sunba v Hartnett Lawyers [2014] QDC 34 at para [21]. The appellant submits the bills were properly itemised because they complied with s 300 LPA in that each of the nine taxed invoices contained sufficient detail to allow a costs assessor to assess costs.

49. [49]
    The respondent submits that the tax invoices supplied by the appellant did not state in sufficient detail the basis for the legal costs to allow legal costs to be assessed, a mandatory requirement pursuant to s 332 LPA.

Consideration

50. [50]
    It is not in dispute that the respondent is entitled to receipt of itemized bills. Section 300 LPA defines “itemized bill” as “a bill stating, in detail, how the legal costs are made up in a way that would allow the legal costs to be assessed under Division 7”

51. [51]
    In Pott v Clayton Utz [2012] QSC 167 at [10] – [17] Boddice J reviewed the legislative scheme and case law concerning itemized bills. He stated that in order to satisfy the statutory requirements:

“[11] A bill must contain such detail as will enable the client to make up his or her mind on the subject of assessment, and so as to enable those advising the client to advise effectively on whether assessment is desirable or not. This requirement is not to be determined in a vacuum. The sufficiency of a bill must be assessed in the context of the knowledge of the client. As such, the test is not that another solicitor should be able to look at the bill and see on its face all requisite information in order to enable an assessment of whether the charges were reasonable. The test is whether the information in the bill, supplemented by what is subjectively known to the client, enables the client, with advice, to take an informed decision whether or not to exercise a right of assessment.

[12] The relevant principles have recently been considered by Applegarth J in Tabtill No 2 Pty Ltd & Ors v DLA Phillips Fox (a firm) & Anor. After referring to the relevant principles, as considered by Reid DCJ in Clayton Utz Lawyers v P & W Enterprises Pty Ltd, Applegarth J observed that an applicant seeking to establish an entitlement to an itemised bill pursuant to s 332 of the Legal Profession Act 2007 (Qld), and the making of directions pursuant to s 743C, carries an onus to demonstrate that the legal practice has not provided an itemised bill in accordance with the statutory entitlement.”

52. [52]
    In Tabtill No 2 Pty Ltd & Ors v DLA Phillips Fox [2012] QSC 115 Applegarth J also considered the relevant principles governing whether a bill is sufficiently itemized. He referred to Reid DCJ’s consideration of the issue in Clayton Utz Lawyers v P&W Enterprises P/L^[17]. Applegarth J stated:

“[81] Reid DCJ considered authorities in respect of comparable legislation, including the decision of Dowsett J in Re Walsh Halligan Douglas’ Bill of Costs which cited with approval the following observations of Mann J in Malleson, Stewart, Stawell and Nankivell v Williams:

‘... the Courts have repeatedly held that a bill of costs must contain such details as will enable the client to make up his mind on the subject of taxation, and will enable those advising him to advise him effectively as to whether taxation is desirable or not.’

After citing this passage and other authorities Dowsett J concluded in the context of s 22 of the Costs Act 1867 (Qld) that:

‘The bill must sufficiently particularise the charge to enable the client to take informed advice as to whether he should demand taxation.’

After referring to various considerations, his Honour continued:

‘I consider that the adequacy of the bills must really be considered in the light of all of these factors. If the test be what is adequate in order to enable the client to determine on advice whether to seek taxation, it is reasonable to take into account the degree of business and legal sophistication of the client, whether the client has in-house legal advice, whether another firm of solicitors is also advising, and any agreement reached between the parties as to the basis for charging.’

Dowsett J concluded that the bills in that case were sufficient. Amongst other things, they described the ways in which the hours were being spent and

‘anybody with reasonable experience in the field of litigation would be able to judge the reasonableness or otherwise of those hours.’

His Honour observed:

‘Of course, even an experienced client may not be able to do that, but the test for the purpose of s 22 contemplates the taking of appropriate advice.’”

53. [53]
    Applegarth J referred to examples in other cases, of tax invoices which did not constitute itemized tax invoices for the purposes of the Act^[18].

“[84]  The applicants in their submission cited examples given in recent cases of the contents of tax invoices that do not constitute itemised bills for the purposes of the Act. These include:

1. (a)
   claims for unexplained meetings in the solicitor’s office involving personnel within the firm;

2. (b)
   costs claimed for “file management”;

3. (c)
   legal research;

4. (d)
   company searches where there is no information as to what companies are being investigated;

5. (e)
   claims for perusing pleadings when it is not clear from the entry in the bill just what is the particular document being perused;

6. (f)
   claims for costs in bills that consist of generalized descriptions of work undertaken; and

7. (g)
   rolled up claims for the undertaking of a number of activities during a period of time but which do not include any details of the size of the letter or e-mail drafted or perused.

These examples are drawn from the authorities of Vitobello and Hayter v Russell & Co Solicitors, Golder Associates Pty Ltd v Challen and Clayton Utz Lawyers v P & W Enterprises Pty Ltd.  However, they are simply illustrative of the general principles that I have discussed, and the sufficiency of the information contained in the tax invoices in this case must be assessed in the circumstances of this case.”

54. [54]
    Several of the factors listed in [84] of Applegarth J’s reasons are present in this case. For example, there are numerous entries in the invoices for internal meetings between staff. The respondent client would not be aware of anything which would throw light on what occurred in the un-particularised internal activities of the solicitors. The client can hardly get proper advice on whether to dispute the bill without details of claims for what amounts to “internal activity” of the solicitors.  There are also entries for numerous emails, faxes and letters charged for multiple units which are not particularized in any way. These are not mere technical deficiencies in the bills. The client is entitled to know the purpose and subject matter of many of the entries in invoices in order to be able to assess, with the benefit of legal advice the reasonableness of the amounts claimed. This is also something the costs assessor is entitled to know.

55. [55]
    Matters to be considered on the costs assessment as set out in s 431(1) LPA include “whether or not it was reasonable to carry out the work to which the legal costs relate” and “whether the work was carried out in a reasonable way”. Where a bill provides no information as to what was done on a particular occasion when a charge has been made for doing work, it is very difficult to see how a costs assessor can determine whether or not it was reasonable to carry out whatever was done on that occasion, and whether or not it was carried out in a reasonable way. In such circumstances, it is necessarily going to be difficult for the client, even with the benefit of proper advice, to assess whether or not the amount so claimed is likely to be recoverable on assessment.

56. [56]
    Rule 743C UCPR provides:

“If there is no itemised bill for all of the costs to be assessed under an application, the relevant court may give the directions it considers appropriate for an itemised bill to be prepared, filed and served.”

57. [57]
    It is obviously much easier for a costs assessor to perform a costs assessment properly if the costs assessment is performed on the basis of an itemised bill. The Magistrate clearly had power under r 743C to give a direction for itemised bills to be prepared, and, having concluded that costs were to be assessed and that itemised bills were not available for all of the costs to be assessed, it would have been appropriate for the magistrate to have given such a direction. The Magistrate may have been concerned about the question of power, but the power is clearly conferred by the rule, and an application for costs assessment under the statute is to be made in the way provided under the UCPR.^[19]

58. [58]
    In my opinion the Magistrate erred here only in failing to give the necessary direction under r 743C UCPR. The appeal should be allowed therefore only to the extent of varying the order made by the Magistrate by inserting a direction that the appellant prepare file and serve within a specified time itemised bills in respect of all of the costs to be assessed. When these reasons are delivered I will hear submissions as to the length of time appropriate.

Orders

59. [59]
    Appeal allowed to the extent of varying paragraph 1 of the order of the Magistrate made 21 October 2015 by inserting after the word “assessed” the words: “on the basis that the costs agreement between the parties is void”, and by inserting paragraph 1A as follows: “The respondent Hartnett Lawyers prepare file and serve on the applicant Iva Chapman an itemised bill for each of the invoices in paragraph 1 on or before 20 April 2017.”

60. [60]
    The appeal be otherwise dismissed.

61. [61]
    The appellant pay the respondent’s costs of the appeal to be assessed.