Allen v Ruddy Tomlins & Baxter

After the respondent law firm sought recovery of legal costs from the applicant, the applicant applied to have the costs assessed. The costs assessor’s certificate was issued eight years later. The applicant then sought to resist a costs order on the basis that the respondent was time barred from recovery. The primary judge found that the Legal Profession Act 2007 and the Uniform Civil Procedure Rules 1999 created a discrete mechanism for recovery, to which s 10(1)(a) Limitations of Actions Act 1974 (the LAA) did not apply. On appeal, the Court unanimously held that there was no such discrete mechanism for the recovery of legal costs, but rather that recovery was founded in an action in contract arising from the costs agreement, to which s 10(1)(a) LAA applied. In the result, Philippides JA and Henry J (McMurdo JA dissenting) held that the respondent was time barred from recovering its costs.

Philippides and McMurdo JJA and Henry J

28 May 2019

Background

The respondent was a law firm and the applicant was a former client of that firm. [1], [4]. The applicant terminated the respondent’s retainer in August 2007, and after some dispute regarding outstanding fees and costs, filed an application for a costs assessment in August 2008. [4]–[5]. A costs assessor was appointed in October 2008, but did not file a final costs assessor’s certificate until some eight years later in July 2017. [5]–[6].

After further uncertainty concerning recovery of the costs, an application for directions under r 743H Uniform Civil Procedure Rules 1999 (“UCPR”) came before the Court. [6]–[7]. The application proceeded on the basis that it was necessary to determine whether the limitation period of six years applying to an action in contract under s 10(1)(a) Limitation of Actions Act 1974 (“LAA”) precluded recovery of the assessed costs. [7]. The primary judge determined that the respondent was not barred from recovery by s 10(1)(a) LAA because the Legal Profession Act 2007 (“LPA”) and the UCPR created a regime for the recovery of legal costs under which the LAA did not apply. [1]–[2].

The applicant applied for leave to appeal to the Court of Appeal. [1]. The primary question on appeal was whether the LPA and the UCPR created a codified regime for the recovery of legal costs such that s 10 LAA did not apply to that process. [3].

Decision

Philippides JA

Philippides JA determined that the LPA did not create a separate statutory cause of action for the recovery of legal costs. [44]. Rather, the recovery of legal costs was founded upon the underlying contractual relationship between a law firm and its client resulting from the costs agreement. [45]. Her Honour therefore considered that the primary judge had erred in finding that the LPA did more than to provide a procedural mechanism for the quantification and enforcement of the right to recover legal fees when no other matters were in dispute between the parties’. [46].

Philippides JA noted that although any court proceeding was an “action” for the purposes of the LAA, an application for costs assessment was concerned with the quantification of, rather than the recovery of, a costs debt. [57]–[58]. Consequently, where a client brings a cost application under the UCPR, they were to be seen as utilising an administrative procedure for the determination of a “dispute as to the quantum of a debt” and not as commencing an action for the purposes of s 10(1)(a) LAA. [60].

Her Honour reasoned further that it was difficult to see why an application for costs assessment lodged by a client should remove that client’s entitlement to raise an objection to the recovery of costs on time limitation grounds, particularly in light of the consumer focus of the LPA. [62]. On those bases, Philippides JA found that an application for costs assessment was not an “action” for the purposes of s 10 LAA, and that the respondent was consequently statute barred from recovering its costs from the applicant. [65]–[66].

Henry J

Henry J agreed with the reasons and orders of Philippides JA, but also elaborated on some aspects of the appeal. [102]–[103]. In particular, his Honour identified that he considered that by reason of s 37 Statutory Instruments Act 1992, an application for further directions in costs assessment proceedings was itself a “proceeding”, such that the respondent was time barred from recovering its costs from the applicant by s 10(1)(a) LAA. [104]–[111].

Orders

In the result, the respondent was time barred from recovering its legal costs from the applicant by s 10(1)(a) LAA. [69], [102]..

B McNamara