In this decision, Bond J considered two issues which will be of interest to practitioners. First, his Honour considered whether an order can be made under s 317 of the Legal Profession Act 2007 for the provision of a written report of legal costs in relation to a former client. His Honour held that s 317 does not apply to former clients. Second, his Honour considered whether a conditional costs agreement imposed an uplift fee. His Honour concluded that the costs agreement did impose an uplift fee, and declared the agreement void for noncompliance with s 324 of the Act.
29 March 2019
The respondent was an incorporated law practice under the Legal Profession Act 2007 (“the Act”). . Each of the five applicants (henceforth, “the applicant”) were former clients of the respondent who had engaged it to act in their respective personal injury claims. . The applicant applied to the Supreme Court for two orders. . The first order was an order requiring the respondent to comply with s 317 of the Act by providing a written report of the legal costs incurred by the applicant. . In the alternative, the applicant relied on the Court’s inherent jurisdiction to justify an analogous order being made. . The second order was a declaration that the conditional costs agreement between the applicant and the respondent was void because it was to be regarded as providing for an “uplift fee” within the meaning of the Act and because it contravened other requirements under the Act governing conditional costs agreements which provide for an uplift fee. .
First order sought
Section 317(1) provides:
“(1) A law practice must give a client, on reasonable request—
(a) a written report of the progress of the matter in which the law practice is retained; and
(b) a written report of the legal costs incurred by the client to date, or since the last bill (if any), in the matter.”
“Client” is defined, for the purposes of the Act other than Ch 3 Pt 3.4 Div 7, as including “a person to whom or for whom legal services are provided”. .
The first issue was “whether subsection (1) should be read as intended to refer solely to a client who is a current client or as intended to encompass both current and former clients”. . Bond J held that the former construction was to be preferred for a number of reasons. . One was that for the purposes of Ch 3 Pt 3.4 Div 7, client is specifically defined to mean “a person to whom or for whom legal services are or have been provided” (emphasis added). . Another was that the Act distinguishes between “client” and “former client” in another provision. .
Accordingly, his Honour concluded that no order could be made requiring the respondent to provide the report under s 317(1) of the Act. . However, his Honour went on to conclude that it was appropriate in the circumstances of the case to order in the exercise of the court’s inherent jurisdiction that such a report should be provided. .
Second order sought
In addition to a number of other amounts, the costs agreement relevantly provided for “a further proportion thereof to reflect the solicitor’s care, consideration, skill and conduct of a proceeding or transaction that is considered by an independent costs assessor to be reasonable having regarded to the matter” (“care and consideration”). . Importantly, that clause also provided that “where a fee/cost payment deferral or nowin nofee arrangement applies, the further allowance must be not less than 15% of the aggregate of all time based items performed” (“the proviso”). .
The costs agreement between the applicant and the respondent provided that the obligation to pay was contingent on a successful outcome. . Accordingly, it was a “conditional costs agreement” within the meaning of the Act. . The first issue was whether, because of the inclusion of the proviso, the conditional costs agreement should also be regarded as providing for the payment of an “uplift fee”. . “Uplift fee” is defined in s 300 of the Act to mean “additional legal costs, excluding disbursements, payable under a costs agreement on the successful outcome of the matter to which the agreement relates”. .
Bond J held that the “wording of the Act reveals a contemplation that not all conditional costs agreement shall be regarded as providing for the payment of an uplift fee”. . His Honour held that the key to determining which conditional costs agreements provide for the payment of an uplift fee lies in the word “additional” in the definition of “uplift fee”. . His Honour continued:
“The insertion of the word ‘additional’ suggests there is a distinction between legal costs payable on the successful outcome and something extra which is to be regarded as ‘additional legal costs’ payable on a successful outcome. The definition contemplates a form of agreement which provides a baseline position or ordinary manner of calculation of legal costs, and that the form of agreement provides for something extra, which is beyond the base line, and imposed ‘on a successful outcome’.” .
Turning to whether the proviso imposed an uplift fee, his Honour noted that where the proviso applies, a particular constraint is imposed, namely that care and consideration allowance cannot be less than 15% of the aggregate of all time based items. . His Honour noted that that constraint does not apply where the costs agreement is not to be regarded as a nowin nofee agreement. . His Honour continued:
“If the ordinary calculation of [care and consideration] would give rise to a figure which is equal to or greater than the figure which is 15% of the aggregate of all time based items then the proviso would not affect the calculation. There would be nothing which could be regarded as ‘additional’ and so there would be nothing which could amount to an uplift fee as defined.
But if the ordinary calculation of [care and consideration] could give rise to a figure which was less than the figure which was 15% of the aggregate of all time based items ... then the proviso would affect the calculation. The proviso would require the payment of an additional amount on top of the ordinary [care and consideration] amount to bring the total amount ... up to 15%. That additional amount would be the amount of the uplift fee.” .
His Honour then noted that the wording of s 324 of the Act (which allows conditional costs agreements to contain uplift fees) “is such that the question whether the costs agreement provides for the payment of an uplift fee is a question which must be capable of being answered at the time of entry into the agreement”. . Accordingly, it followed that the costs agreement did provide for an uplift fee. .
Finally, his Honour considered whether the costs agreement should be declared void under s 327 because it contravened s 323 or s 324 of the Act, which prescribe various requirements for conditional costs agreements containing uplift fees. . His Honour concluded that the costs agreement should be declared void because it did not contain any estimate or range of estimates of the uplift fee, as required by s 324(3). .
M J Hafeez-Baig