M J Arthurs Pty Ltd v JHK Legal Australia Pty Ltd
[2017] QDC 70
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- M J Arthurs Pty Ltd v JHK Legal Australia Pty Ltd[2017] QDC 70
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M J Arthurs Pty Ltd v JHK Legal Australia Pty Ltd[2017] QDC 70
M J Arthurs Pty Ltd v JHK Legal Australia Pty Ltd[2017] QDC 70
DISTRICT COURT OF QUEENSLAND
CITATION: | M J Arthurs Pty Ltd v JHK Legal Australia Pty Ltd [2017] QDC 70 |
PARTIES: | M J ARTHURS PROPRIETARY LIMITED (first applicant) And MICHAEL JAMES ARTHURS (second applicant) v JHK LEGAL AUSTRALIA PROPRIETARY LIMITED (respondent) |
FILE NO/S: | D4112/2016 |
DIVISION: | |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 23 March 2017 |
DELIVERED AT: | Brisbane |
HEARING DATE: | (Application without oral hearing) |
JUDGE: | McGill SC, DCJ |
ORDER: | Order that: (1) the order of the registrar of 17 February 2017 be set aside. (2) Peter Arthur be appointed as costs assessor to assess the respondent’s tax invoices in Schedule 1A to the originating application pursuant to the Legal Profession Act 2007 s 335. (3) the costs of the application be reserved, including the costs of the rehearing. |
CATCHWORDS: | COSTS – Assessment – appointment of costs assessor – assessment under the Legal Profession Act 2007 – relevant considerations – significance of consumer protection legislation. Legal Profession Act 2007 s 335. UCPR rr 667, 743F, 791. Lessbrook Pty Ltd v Whap [2014] 2 Qd R 102 – considered. Picamore Pty Ltd v Challen [2015] QDC 67 – cited. Radich v Kenway [2014] QCA 301 – cited. |
COUNSEL: | |
SOLICITORS: | Each party appeared for itself |
- [1]On 14 October 2016 the applicants filed an application in this court for the assessment pursuant to the Legal Profession Act 2007 (“the Act”) of certain legal costs charged by the respondent. After receiving submissions from the applicants and the respondent, on 17 February 2017 a registrar ordered that Gregory Robert Ryan be appointed as costs assessor to assess the respondent’s tax invoices pursuant to s 335 of the Act, and that the costs of the application be reserved. After that order was made some correspondence was received from the applicants challenging that order, essentially on the basis that there had been previous contact between Mr Ryan or his firm and the respondent in relation to the work done for the applicants by the respondent, which had been referred to in various invoices for which the applicants had been charged. This was said to suggest a professional relationship between Mr Ryan and the respondent, which made it inappropriate for him to be appointed as a costs assessor in respect of a dispute over their legal costs.
- [2]The registrar who received the correspondence referred the matter to a judge, apparently pursuant to r 982, having treated it as an application to set aside or vary the order under r 667. The order was filed on 17 February 2017, and therefore the application could not be under r 667(1). It is not obvious to me that any of the categories in r 667(2) applies in this case, in circumstances where the matter proceeded before the registrar without an oral hearing, but after receiving submissions in writing from both parties. In effect all that has happened is that the applicants have sought to make additional submissions after the decision of the registrar, which does not come within r 667.
- [3]Nevertheless, there is in r 791 a provision for a party to an application dissatisfied with the decision of a registrar, with the leave of the court, to have the application reheard by the court. That in my view was the appropriate mechanism for the applicants to follow, and if that procedure had been followed the matter could have come before me in the same way as it has. In fact there has been no oral hearing before me, both parties agreeing to the matter being dealt with on the basis of written submissions. In circumstances where the applicants in this matter are not legally represented, and where there was a mechanism under the rules which they could have followed in order to bring this matter before me in essentially the same way as it has come before me, subject to the requirement for leave, I consider that the correct approach is for me to treat what has happened as if the applicants had applied for leave to have the matter reheard by the court under r 791.
The dispute
- [4]Before the registrar there was a dispute as to which costs assessor should be appointed. The applicant nominated Mr Arthur, who is an approved costs assessor and whose consent has been filed as required by the rules on 2 December 2016. The respondent filed consents, by Mr Ryan on 14 February 2017, and by another costs assessor, Therese Tonkin, on 18 November 2016. The respondent sought the appointment of Mr Ryan, but in the alternative Ms Tonkin if Mr Ryan was for any reason not considered appropriate. The registrar expressed the view that all three nominated costs assessors were well respected and in terms of experience, skill, diligence and promptness, all of them were considered suitable, and noted that neither party had questioned their level of experience, skill and diligence. The position is the same before me. As I recall on one occasion I reviewed a costs assessment conducted by Mr Ryan without any serious adverse comment, though I would not in any case place much significance on a single assessment. So far as I can recall I have never reviewed an assessment by either of the others nominated.
- [5]The registrar considered whether there was a perceived commercial professional relationship with the respondent, and concluded that the circumstances described by the applicant would not show the existence of such a relationship with each particular costs assessor, and that both costs assessors had provided certificates indicating that there was no conflict in undertaking the matter and that they were not aware of any other impediment precluding the appointment. The material before the registrar included an assertion by the applicants that Ms Tonkin had previously been recommended and then engaged to provide services as a costs assessor by the respondent. It is true that after this correspondence the respondent suggested Mr Ryan as an independent costs consultant, but I do not think that should be treated as some sort of admission that Ms Tonkin was not suitable because of the matters advanced on behalf of the applicants.
- [6]Ultimately it appears that the registrar, having considered that the existence of a commercial and professional relationship with the costs assessors nominated with the respondent had not been established, seems to have dismissed this aspect of the matter from further consideration, and turned to the question of cost. On this point the registrar considered that the effect of the decision of the Court of Appeal in Lessbrook Pty Ltd v Whap [2014] 2 Qd R 102 made it appropriate to choose an assessor with the lowest hourly rate.
Lessbrook Pty Ltd v Whap
- [7]That was a case where the Court of Appeal set aside an order of a judge who had set aside a registrar’s order appointing a particular costs assessor, in circumstances where, like here, the parties agreed on the appropriateness of an assessment but disagreed as to the identity of the costs assessor. This involved an assessment of costs inter partes, not one under the Act. The judge at first instance had held that the differences in listed hourly rates for the costs assessor was not a sufficient basis for favouring one over the other, bearing in mind that the lowest hourly rate does not necessarily mean the lowest overall bill, a proposition which is with respect undoubtedly true.[1] However it appears that that judge then decided that the conflict between the parties was appropriately resolved on the basis of favouring the assessor whose consent to act was filed first.
- [8]The Court of Appeal acknowledged that the party with the benefit of the costs order would normally have the greater interest in expedition, and there may be some advantage in that party’s solicitors being able to work well with the costs assessor, though a close relationship may be a matter that tells against the appointment of the costs assessor: [30]. The court noted that [32] “the losing party also has a strong interest in the costs assessment. That party has been ordered to pay the other party’s assessed costs and has the right under the rules to put forward its own nominee.” The court held that filing a consent first was not necessarily an irrelevant circumstance, but its relevance depended on the particular situation in the particular matter: [31].
- [9]The court therefore held that the approach of the judge at first instance had been in error, and that there were good grounds shown for interfering with the discretionary decision of the judge. In those circumstances the court appointed the costs assessor originally appointed by the registrar, though it appears that this occurred, not because the court held that the registrar’s order should never have been interfered with, but because that assessor had the lowest hourly rate, and there was evidence that that assessor was in a position to commence the assessment immediately, a factor which distinguished him from the rival nominee: [34].
- [10]That analysis was made in a context where the costs being assessed were costs payable pursuant to an order between parties to a proceeding, not costs payable under the Act. In the matter before the Court of Appeal the applicant with the benefit of the costs order would have an interest in having the costs assessed as generously as possible, whereas the party liable to pay the costs would have an interest in minimising the amount payable. Confronted with such conflict, there is no particular reason for the court to favour one party or the other. The position is I think different in the case of a costs assessment under the Act, where the application is made by the client, as is the case here. In such a situation, again, the client has an interest in having the costs assessed as low as possible, and would therefore favour a strict and rigorous costs assessor, whereas the solicitors have an interest in having the costs assessed as generously as possible, and might be expected to prefer the nomination of an assessor who might, by disposition or reputation, be disposed to assess generously.
- [11]Given that this is essentially consumer protection legislation, and that the right is to have legal costs independently assessed by an appropriately qualified expert, it does seem to me that there is some force in the proposition that for this reason there should be a tendency, in the case of applications under the Act, for the court to favour assessors nominated by the client rather than assessors nominated by the lawyer. A client who seeks to have the court appoint a supposedly independent expert to assess the bill that has been received from their solicitors and then finds that the court appoints to perform that assessment an assessor nominated by the solicitors may well feel a justified sense of grievance in the process, regardless of the confidence that may be possessed by the registrar, or for that matter by a member of the court, in the independence and professional integrity of the costs assessor concerned. This was not a factor which arose for consideration in Lessbrook, but I consider it is a material factor in the case of an appointment of a costs assessor under the Act.
Analysis
- [12]I should say that, as I read r 791, it provides for a rehearing of the application by the court, rather than for an appeal by way of rehearing in the technical sense, so that, if leave is given under the rule, I reconsider the application de novo, at least unless there is a condition of the grant of leave about the nature of the rehearing under sub-rule (2)(c). The Court of Appeal is Lessbrook left open any consideration of the nature of the rehearing provided for in r 791, and dealt with the appeal as one from the exercise of a discretion by the primary judge: [22], [23]. The point is therefore not whether there was some error in the registrar’s approach to the question, but how I approach the question.
- [13]Nevertheless, I am a little concerned about the passage in the registrar’s reasons which suggests a view that the decision in Lessbrook provided some obligation to choose the assessor with the lowest hourly rate, at least in the absence of other competing considerations. There are I think two things which can be said about that. The first is that the hourly rate was regarded by the Court of Appeal as a significant factor, though it did not say it was the determinative factor. Indeed, it was not the only factor that the court took into account in making the order it ultimately made. The significance of the hourly rate in that case arose really because of the absence of any other significant basis for distinguishing between the two candidates for appointment. The second matter is that, as I noted earlier, the court in that case was dealing with the appointment of a costs assessor to assess costs payable under an order of the court, that is an assessment under Pt 3 of ch 17A, rather than an assessment under the Act, an assessment under Pt 4 of ch 17A. I do not think the significance of that difference was appreciated by the registrar.
- [14]In some respects Lessbrook was an unfortunate decision. The hourly rate of charge is not necessarily a particularly useful discriminating factor, partly for the reason acknowledged by the Court of Appeal, and partly because it is likely to produce a race to the bottom among costs assessors seeking work. There is also a risk that a party could manipulate the system by persuading a costs assessor to agree to a particularly low hourly rate, perhaps in return for some other benefit.[2] It occurs to me that a firm of solicitors who often engage costs assessors for one reason or another might be in a position to bring this form of manipulation to bear. Such an action would not reflect any credit on the costs assessor concerned, but my experience in costs matters has been sufficient to show that there is a good deal of variation in the quality of those who are practising in Queensland as approved costs assessors.[3]
- [15]A further difficulty that a registrar faces under the current system is that either there will be one assessor nominated by one party about whom there is no contest, or the dispute will almost variably turn into a dispute between two parties each of whom puts forward a particular nominee, and there is no process for obtaining a truly independent nominee. However desirable it would be for registrars to be able to make comparison between costs assessors on the basis of relevant experience, skill, diligence and promptness, I doubt very much whether they have sufficient knowledge of the work of costs assessors actually to be aware of these matters, and it is very difficult for parties in preparing an application of this nature to obtain and put before the registrar relevant evidence on these matters. Such a thing might be a particularly challenging task for a client seeking to dispute legal costs being charged without the benefit of legal advice in that dispute. Such a client could easily feel that the system was stacked against him.
- [16]In some ways it would be better if disputed appointments were resolved by applying a system which I understand used to be applied for the selection of liquidators of companies when they were being wound up in New South Wales: the relevant registrar had a list of approved liquidators, and in the case of a particular company would simply appoint the next liquidator on the list. The difficulty is that it is necessary to obtain in a particular case confirmation that a costs assessor selected would be in a position to consent to the appointment and that there would be no conflict of interest, in compliance with r 710(2)(d).
- [17]In this particular case, the matters advanced by the respondent, successfully before the registrar, were that Mr Ryan had the lowest hourly charge rate, and that the costs assessor nominated by the applicants practised on the Sunshine Coast, which would not be as convenient for dealing with the parties. As to the latter point, in my experience the process of costs assessment does not involve costs assessors actually holding oral hearings, and necessary communications with the parties are undertaken in writing, these days almost invariably by email. Apart from the fact that it is desirable that the costs assessor have access to the solicitor’s file when performing the assessment, it is of little practical relevance whether the assessor is working in Brisbane or Maroochydore or Timbucktu. The location of the costs assessor outside Brisbane is not in my opinion of any great significance.
- [18]In terms of costs, the difference between Mr Ryan and Mr Arthur is $20 per hour, not a large difference. There is however one curiosity that I have noticed. Mr Arthur’s hourly rate in his consent is consistent with the hourly rate published on the Court website in the Register of Approved Costs Assessors, whereas the hourly rate quoted by Mr Ryan is somewhat lower than the hourly rate quoted on the Register, at least for District Court work, which is the case for these matters. Of course this may simply mean that Mr Ryan has failed to keep the Register up-to-date, as required by r 743M(3). The rate quoted by Ms Tonkin, both in the consent and on the website, is the same as Mr Arthur’s rate, though on the website she says that time spent doing work of a clerical nature will be charged at a significantly lower rate.
- [19]The additional material before me and not initially before the registrar indicates that there were some occasions, in the course of doing work for the applicants, that the respondent had some contact with Mr Ryan or his practice in relation to costs assessment work. The respondent has advised that this was only minimal contact, and that Mr Ryan did not actually do any work on the applicant’s matters, but it does occur to me that this sort of reassurance might sound somewhat hollow to a client when coming from a former solicitor with whom the client is now in at least disagreement if not dispute.
- [20]This I think is the real significance of some dealings between the respondent and Mr Ryan in the past, whether in relation to the applicant’s matters or others. This legislation is consumer protection legislation designed to give clients of legal practitioners comfort in the knowledge that they can have the costs that they are being charged by the practitioners reviewed by an independent expert.[4] Almost any suggestion of some association between the costs assessor and the legal practitioner is likely to undermine the sort of confidence which the client might otherwise be expected to have in such a process. It is I think important, if the client is to have the degree of confidence in the objectivity of the process which the legislature intended clients to have, for there to be, not just an absence of a demonstrated commercial and professional relationship between the costs assessor and the lawyer, but of any reasonable apprehension of a possible relationship.
- [21]Whether that reasonable apprehension could arise simply on the basis that a particular costs assessor was nominated for appointment by the lawyer is a matter that can be left for another day. In circumstances however where there is evidence that the lawyer has previously engaged Mr Ryan or his practice as a costs consultant, I think it is reasonable for the applicants to have some apprehension about the existence of some possible relationship between them, and that this might lead to some influence on the way in which the assessment of costs was carried out. However slight a shadow on Mr Ryan’s independence this may be, there are plenty of other costs assessors available without it.
- [22]Overall therefore I consider that the importance of providing the applicants with the sort of independent assessment in which they can have confidence is a factor which tells against the appointment of Mr Ryan as a costs assessor. Given that the fee advantage of Mr Ryan is relatively small, though not insignificant, I consider that this factor outweighs it, and that, on that basis, the appropriate order is that the applicants’ nominee should be appointed to assess these costs.
- [23]I therefore consider that it is appropriate that this matter be reheard, and accordingly I give leave to the applicants to apply for rehearing. I am not aware of any particular restrictions imposed as to the test to be applied when deciding whether to give leave under r 791, and consider that the question is simply one of whether the court thinks that it is appropriate to give leave in all the circumstances of the case. I order that the order of the registrar of 17 February 2017 be set aside, and that Peter Arthur be appointed as costs assessor to assess the respondent’s tax invoices pursuant the Act, s 335. The costs of the application are reserved, including the costs of the rehearing.
Other matters
- [24]Two other matters I should mention. It is important that the order appointing a costs assessor identify just what costs the assessor has to assess.[5] The order of the registrar did not identify the tax invoices to be assessed. The application was for the assessment of all tax invoices of the respondent set out in Schedule 1A to the application. I take it that there was no dispute before the registrar as to whether all of those costs should be assessed, and the order should have provided for the assessment of all of the legal costs in the invoices in Schedule 1A to the application.
- [25]The application also seeks an order for itemised invoices to be provided. This is not an order which a registrar can make under r 743F, but as I have said elsewhere I am firmly of the view that itemised invoices ought to be provided before any costs assessment, otherwise the costs assessment can become unsatisfactory, unwieldy and inefficient.[6] If there is any dispute about this matter an application should be brought before the court promptly, otherwise, if the respondent has not already provided itemised invoices, they ought to be provided promptly, so that they can be assessed by the costs assessor.
Footnotes
[1] As recognised on appeal: [26].
[2] I have heard it said that on one occasion, when there was a contest about which costs assessor to appoint, one of the parties secured agreement from its nominee to charge a lower fee than had previously been advised, so as to be lower than the fee charged by the other nominee. No registrar should appoint a costs assessor who would do such a thing.
[3] In this paragraph I am speaking generally, not in any way about this matter.
[4] Why lawyers should be singled out for this treatment is explained by historical factors I need not go into. The general attitude of the legislature to lawyers may be seen in the fact that the Legal Profession Act 2007 is much thicker than the Drugs Misuse Act 1986.
[5] Radich v Kenway [2014] QCA 301.
[6] Picamore Pty Ltd v Challen [2015] QDC 67.