Applicant (Respondent to appeal) v Respondent (Appellant)

1 This is an appeal from the Costs Court constituted by the Costs Judge, Associate Justice Wood.

2 The appeal arises from a claim by the plaintiff, a firm of solicitors named Kliger Partners, against the defendant, Mr Anthony Lotzof, on bills of costs totalling approximately $66,000 for professional fees and disbursements in relation to certain legal work performed between November 2012 and May 2013. Kliger Partners addressed the bills for this work to both Mr Lotzof and a certain company controlled by him.[1] It had done likewise in relation to earlier, related work. The bills relating to the earlier work were settled, but it is not clear whether the payments made were made by Mr Lotzof or by the company. The company went into liquidation in August 2013. Kliger Partners claims that Mr Lotzof is liable to it for the fees pursuant to a certain costs agreement, evidenced in writing, to which, it says, Mr Lotzof personally, in addition to the company, was a party.

3 The present claim has been much disputed. Kliger Partners first sued on it in the Magistrates' Court. The proceeding was stayed as against the first defendant, the company, because it was in liquidation. Mr Lotzof, as the second defendant to the Magistrates' Court proceeding, raised a host of defences, including absence of personal liability, inadequate costs disclosure, absence of consideration, unconscionability, undue influence, misleading and deceptive conduct and estoppel. Much affidavit material was filed in the Magistrates' Court. However, on 19 November 2013 a Magistrate stayed the proceeding as against Mr Lotzof until further order. The stay was granted primarily on the basis, so I was told,[2] that Kliger Partners had not fully complied with its costs disclosure obligations under the Legal Profession Act 2004. Apparently, it was seen as no impediment to the grant of the stay, in so far as the application for it was based on non-disclosure of potential costs liabilities, that Mr Lotzof was at the same time denying that he, personally, was a party to any retainer or costs agreement with Kliger Partners. In any event, the result was that, if Kliger Partners wished to pursue the claim against Mr Lotzof, it was obliged by s 3.4.17 of the Legal Profession Act 2004 to make application to the Costs Court under s 3.4.40 of that Act for a review of its bills of costs. It did so, by way of a summons for taxation of costs filed 23 December 2013. In the Costs Court, Mr Lotzof indicated that he would rely on a similar host of defences.[3] Once again, Mr Lotzof sought to rely on, among other things, non-disclosure of costs liabilities while at the same time denying that he was under any personal liability for costs.[4]

4 On or about 10 February 2014, an affidavit of that date of Emily Marson (a graduate trainee solicitor at Kliger Partners) was filed and served in support of Kliger Partners' summons. It exhibited all or most of the affidavits and other documents that had been filed and served in the Magistrates' Court. On the next day, 11 February 2014, a judicial registrar sitting in the Costs Court made an order which, it seems, has since been treated as being, by implication,[5] an order under Rule 47.04 that a question or questions in the proceeding be tried before the trial of the proceeding. The order made by the judicial registrar also provided for the filing and service of further affidavit material on both sides and for 'the matter' to be fixed for hearing on 24 April 2014[6] in the Costs Court before Associate Justice Wood. As counsel for Kliger Partners later acknowledged,[7] it was an unfortunate aspect of the procedure adopted that the invitation which Rule 47.04(a) contains for the question or questions to be stated as part of the order, or for directions to be given as to the manner in which the question or questions may be stated, was not taken up. There were, apparently, exchanges of proposals between the parties in this regard,[8] but no questions, much less any precise questions, were actually stated by any order made prior to the hearing before Associate Justice Wood, which in fact took place on 24 April 2014. In the meantime, Kliger Partners had filed a substantial affidavit of the principal solicitor who had handled the work in question, Mr Anton Benjamin Block. It had numerous exhibits. It was intended to replace, in large part, the affidavit of Emily Marson. In response, Mr Lotzof filed an affidavit and a supplementary affidavit each dated 15 April 2014, and Kliger Partners responded with a further affidavit of Mr Block dated 17 April 2014.

5 In the early stages of the hearing before Associate Justice Wood on 24 April 2014, there was confusion and disagreement between counsel as to the issues or questions that could or should be heard by his Honour that day. As discussions progressed, the parties and his Honour came to focus on two broad topics - first, whether Mr Lotzof was personally liable for the fees in question under the costs agreement and, second, the matter of non-disclosure of potential costs liabilities. As part of the discussions relating to the first broad topic, there was brief reference made to whether the costs agreement was 'enforceable' or 'unenforceable'. Subsequently, Associate Justice Wood ruled that the costs agreement was 'enforceable'. On this appeal, the parties were, at least for a time, in disagreement about whether, in holding that the costs agreement was 'enforceable', Associate Justice Wood was determining an issue or issues beyond those which had been raised for his decision. As will be seen, in my opinion, Associate Justice Wood did no more in this regard than consider and determine an issue that was squarely before him, namely whether the costs agreement was unenforceable against Mr Lotzof for want of consideration, as distinct from any other cause of potential enforceability. I will return to that point later in this judgment. However, for the moment, it may be helpful to classify into four parts what I see as the issues that were heard and determined by the Costs Court in this matter. I would summarise those issues as follows:

(1) Was Mr Lotzof himself, as distinct from the abovementioned company controlled by him, a party to a costs agreement with Kliger Partners?

(2) Did the terms of the alleged costs agreement cover the particular legal work the subject of the bills in question, as distinct from earlier work?

(3) Was the costs agreement unenforceable against Mr Lotzof for want of consideration?

(4) Should any liability of Mr Lotzof be reduced by any and what amount under s 3.4.17(4) of the Legal Profession Act 2004 on account of alleged non-compliance by Kliger Partners with its costs disclosure obligations under that Act?

6 Various objections to parts of the affidavit material were heard and determined by the Costs Court. The relevant principal of Kliger Partners, Mr Block, was present and available for cross-examination but, after a certain concession was made by counsel for Kliger Partners, counsel for Mr Lotzof indicated that he did not require Mr Block to be called.[9] On the other hand, Mr Lotzof having been required to attend for cross-examination, counsel for Kliger Partners did proceed to cross-examine him.

7 Following the conclusion of oral submissions on 24 April 2014, Associate Justice Wood reserved his decision. On 12 May 2014 his Honour published a document of that date headed 'Reasons for Rulings'. It dealt with each of the four issues summarised above, albeit that his Honour ran together under the heading 'The First Question' the three issues which I have classified as issues one, two and three, each of which went to whether Mr Lotzof was under any personal liability at all for the bills in question. His Honour dealt with the costs disclosure issues (which I have bundled together as issue (4)) under the heading 'The Second Question'. Associate Justice Wood decided the first three of the issues (as I have classified them) in favour of Kliger Partners. That is to say, his Honour found that Mr Lotzof, personally, was a party to, and was liable under, a costs agreement with Kliger Partners that was evidenced by certain documents produced in July 2012; that the costs agreement extended to and covered the particular legal work in question; and that there was no want of consideration and that therefore the agreement was not unenforceable for want of consideration. As to the issue numbered (4) above, his Honour identified certain instances of non-compliance by Kliger Partners with their statutory costs disclosure obligations and, in the exercise of his discretion under the Act, his Honour determined that a 5 percent reduction should be applied to the total of the bills under review (as ultimately taxed) on this account.

8 In his reasons,[10] Associate Justice Wood rightly noted that the legal costs already expended by the parties in the disputes over the bills, and the projected future costs, were in danger of offending the proportionality provisions of the Civil Procedure Act 2010.

9 Nevertheless, on or about 27 May 2014, Mr Lotzof filed and served a document entitled 'Notice of appeal against order of Associate Judge'. The document stated that Mr Lotzof appealed against part of the 'determination' of Associate Justice Wood and in particular against what were described as the 'rulings' of his Honour to the effect that there was a costs agreement between Kliger Partners and Mr Lotzof in his personal capacity, that the terms of the costs agreement were as contained in the documents produced in July 2012, that the costs agreement was enforceable and that the taxed costs payable to the plaintiff should only be reduced by 5% on account of non-disclosure. It was asserted that the reduction should be up to 75%. Twenty grounds of appeal were included, together with lengthy particulars.

10 On or about 4 June 2014, Mr Lotzof filed and served a folder of 444 pages entitled 'Court Book' for the purposes of the purported appeal. It contained a variety of copy documents, arranged in no particular order. It included most, but not all, of the affidavit material and exhibits that had been before the Costs Court.

11 On or about 13 June 2014, Kliger Partners filed and served a notice of contention in the purported appeal. Three matters were relied on as additional grounds on which the 'determination' of the Costs Court could be supported.

12 To this stage, the Costs Court had not made, and neither side had requested the Costs Court to make, an order formalising the outcome of the hearing as recorded in the 'Reasons for Rulings'. However, it appears from the Court file (although the Court Book is virtually silent in this regard) that on 16 June 2014 Kliger Partners applied to Associate Justice Wood by a letter of that date for orders of two kinds, namely orders specifying the questions that had been before the Costs Court, together with the answers to those questions; and, second, an order that Mr Lotzof pay Kliger Partners' costs of the 'two preliminary issues'. On 17 June 2014, the solicitor for Mr Lotzof sent an email to the Court in response. In the email, he advised that Mr Lotzof objected to the application for costs. He proposed that there be written submissions as to costs. He also opposed the orders for the specification of questions and answers. He submitted that the reasons of Associate Justice Wood dated 12 May 2014 contained a decision or determination on a costs review pursuant to Division 7 of Part 3.4 of the Legal Profession Act 2004 and that it was not appropriate to make an 'order'. However, he did not take issue with the wording of the proposed questions and answers, as such.

13 This debate came before Associate Justice Wood for hearing on 20 June 2014. It appears that counsel for both parties attended. In the end, Associate Justice Wood determined that he should make an order formalising the outcome of the earlier hearing, particularly in view of the pending appeal, and that he should reserve costs. In the authenticated order, in 'Other Matters', the following recitation appears:

Consequent upon the publication of reasons for rulings made 12 May 2014 in respect of preliminary questions the Court now formalises the order giving effect to the rulings made to enable the pending appeal to be determined.

Putting aside the question of costs, the wording of the substantive terms of the order reflected almost exactly the wording proposed in the letter of 16 June 2014 from Kliger Partners. Although some of the references in the order may not be understood until after I have set out further facts, it is desirable to set out the substantive terms of the order now, viz:

1. The determination of the questions other than those answered below (which were identified by the parties as questions suitable for preliminary determination) and which go to the question of whether the costs agreement should be set aside are to be determined subsequent to the determination of the questions answered in this order.
2. The question "Is there are a costs agreement between the Applicant and the Respondent?" be answered "Yes".
3. The question "Is any such costs agreement enforceable in the sense that it was not void ab initio?" be answered "Yes".
4. The question "What are the terms of any such costs agreement?" be answered "The terms are written and contained in the letter of 11 July 2012 and the enclosed costs agreement".
5. The question "To what extent did the Applicant comply with any obligations to give the Respondent the disclosure required by Division 3 of Part 3.4 of the Act?" be answered:

"It complied except that

(a) It breached s. 3.4.9(1)(g)(ii) by failing to give in writing an estimate of the costs liability the client might be ordered to pay if unsuccessful as soon as reasonably practicable after the applicant was retained;

(b) It breached s. 3.4.16 by failing as soon as practicable after 2 April 2013 at the latest to give in writing an updated estimate of the costs of the arbitration, when it became apparent that the arbitration hearing was going to be split between liability and quantum; and

(c) It breached s. 3.4.13 by failing shortly prior to the execution of settlement of the arbitration to disclose sufficient information in relation to the respondent's costs liability as required s.3.4.13(1)(a).

1. The question "Should the taxed costs be reduced under s. 3.4.17(4) of the Act because of any failure of the Applicant to give such disclosures?" be answered "Yes".
2. The question "If the taxed costs should be so reduced, by how much should they be reduced?" be answered "By 5%".
3. The parties costs of the preliminary issues be reserved pending finalisation of the proceedings.

In my view, it was entirely appropriate for his Honour to make a formal order encapsulating the preliminary questions which had been isolated, as his Honour perceived them, and his Honour's answers to those questions. It was appropriate to do so whether or not an appeal was pending.[11] In any event, and notwithstanding the attitude that had previously been adopted by the solicitor for Mr Lotzof, it was agreed by counsel for both parties before me that the present matter should be treated as an appeal from the order made on 20 June 2014, and that the reasons stated in the document published on 12 May 2014 should be treated as the reasons for the making of that order.

14 On 10 April 2015, Kliger Partners filed a folder entitled 'Supplementary Appeal Book' containing more than 200 pages. The folder purported to complete the documentary material that had been before the Costs Court. It also included a transcript of the hearing before the Costs Court and several other documents. It continued the pagination from Mr Lotzof's Court Book. Thus, 658 pages in total were assembled. The documentary material as a whole was in such a confusing state that Kliger Partners felt it desirable to produce for this Court a two page document entitled 'Guide to the Appeal Books'.[12] According to the Guide, substantial parts of the affidavit material reproduced in the Court Books were not read before the Costs Court, or were read only for a limited purpose, such as to authenticate documentary exhibits.

15 Ultimately, the appeal came on for hearing before me. Counsel for Mr Lotzof appeared to endorse the accuracy of the 'Guide to the Appeal Books' produced by Kliger Partners.[13] The hearing occupied an entire day. In addition, the parties' voluminous written submissions were to be taken as read. No matter what I decide, my decision may not bring finality to the disputes between the parties relating to the bills of costs. Perceiving this, I invited the parties to endeavour to resolve their differences by agreement without requiring this complex appeal to go to judgment. Apparently, however, no agreement has been reached. The parties have not heeded the warning issued by Associate Justice Wood relating to the danger of offending the proportionality provisions of the Civil Procedure Act 2010.

16 Given the manner in which this proceeding has progressed and its possible continuance in the future, and speaking with the benefit of hindsight, I have some reservations as to whether it was appropriate for the preliminary questions to have been identified and separately tried in the manner described above.[14] Although this point was not raised by the parties, as the Judge hearing this appeal, I have felt it necessary to consider whether it was appropriate for the Costs Judge to have answered the preliminary questions at all, and whether the preliminary question procedure remains appropriate.[15] Although the conduct of the parties to date means that I cannot be entirely confident of this outcome, I hope and expect that, by my dealing in detail with the issues that have been raised, a substantial part, at least, of the controversy between the parties can be quelled. For that reason, I have decided not to send the parties back to the beginning.

17 In my view, although the wording of paragraph 3 of the order should be amended for greater clarity and certainty, there is otherwise no sufficient basis for touching any part of the order of the Costs Court, and, subject to that amendment, the appeal should be dismissed accordingly.

The right of appeal and the nature of the appeal

18 It is common ground that Mr Lotzof has a legal right to bring this appeal.

19 The parties have proceeded on the basis that a right of appeal is conferred either by s 17I of the Supreme Court Act 1986 or by s 3.4.47 of the Legal Profession Act 2004 or by each of those sections separately or by the combined operation of them. Section 17I of the Supreme Court Act 1986 has at all relevant times provided:[16]

17I Appeals

Unless otherwise expressly provided for by this Act or any other Act or the Rules, an appeal lies to the Trial Division constituted by a Judge of the Court from a determination of the Costs Court constituted by a Costs Judge.

As in force at the relevant time,[17] s 3.4.47 of the Legal Profession Act 2004 provided:[18]

3.4.47 Appeal

A person may appeal from a decision of the Costs Court in accordance with the Supreme Court Act 1986 and the Rules of the Supreme Court.

Notwithstanding that the order made on 20 June 2014 did not finalise the disputes between the parties over the bills, each party contends that the order amounted to a 'determination' within the meaning of s 17I of the Supreme Court Act 1986 or to a 'decision' within the meaning of s 3.4.7 of the Legal Profession Act 2004 or to both. I am prepared to assume that the parties are correct in those particular respects.[19] However, in order to identify the true source of Mr Lotzof's right of appeal, if any, it is necessary to consider other aspects of the sections just mentioned.

20 Although in different Acts, the two sections should no doubt be read together. Both were introduced by the same amending legislation - the Courts Legislation Amendment (Costs Court and other Matters) Act 2008 - which created the Costs Court as a part of the Trial Division of the Supreme Court of Victoria as from 31 December 2009. Both sections commenced to operate on that day. Section 3.4.47 of the Legal Profession Act 2004 fell within Division 7 of Part 3.4 of that Act. Division 7 related exclusively to the 'review'[20] of legal costs payable to a law practice by its client or by a 'third party payer'.[21] On one view, s 3.4.47 of the Legal Profession Act 2004 did not itself confer a right of appeal from a 'decision' of the Costs Court, but merely directed the reader to the Supreme Court Act 1986 and to the Rules of the Supreme Court insofar as that Act and/or those Rules might have created such a right of appeal. Discordantly, however, the very section of the Supreme Court Act 1986 which appears to be principally relevant, namely s 17I itself, does not in terms create a right of appeal from a 'decision' of the Costs Court but rather creates a right of appeal from a 'determination' of that Court. Further, s 3.4.47 of the Legal Profession Act 2004, by its use of the word 'and', seemed to envisage that there would be found in the Supreme Court Act 1986 and in the Rules of the Supreme Court an integrated scheme 'in accordance' with which a person might 'appeal' from a 'decision' made by the Costs Court in a solicitor-client type costs review. However, no scheme of that precise description was or is to be found in the Act or the Rules.

21 Section 17I of the Supreme Court Act 1986 is at once broader and narrower than the kind of provision which s 3.4.47 of the Legal Profession Act 2004 seemed to envisage. It is broader in that it is not confined to decisions (or determinations) in solicitor-client type costs reviews. It is narrower in that it only applies to a determination of the Costs Court constituted by a Costs Judge. Hence it has no application to a determination of the Costs Court constituted by a Judicial Registrar, a Costs Registrar or a Deputy Costs Registrar. However, since the order under appeal was made by a Costs Judge and may be taken to amount to a 'determination' of the Costs Court, s 17I of the Supreme Court Act 1986 would seem to apply to it, whether or not s 3.4.47 of the Legal Profession Act 2004 also applied to it.

22 On the other hand, it will be recalled that s 17I of the Supreme Court Act 1986 provides:[22] 'Unless otherwise expressly provided for by this Act or any other Act or the Rules, an appeal lies to the Trial Division constituted by a Judge of the Court from a determination of the Costs Court constituted by a Costs Judge'. Given that s 17I of the Supreme Court Act 1986 and s 3.4.47 of the Legal Profession Act 2004 must be read together and must, if possible, be reconciled, it may be accepted that, for the purposes of s 17I, an appeal from a determination of the Costs Court constituted by a Costs Judge was not to be taken to be 'otherwise expressly provided for' by s 3.4.47 of the Legal Profession Act 2004 itself. But what of the Rules? At all times since the Costs Court first came into existence, Rules 63.56.1 to 63.57 (inclusive) of Chapter I of the Supreme Court (General Civil Procedure) Rules 2005 have provided for 'reconsideration' and 'review', in defined circumstances, of an 'order' of the Costs Court as variously constituted.[23] Of those Rules, Rule 63.57 provides for the 'review' by a Judge of the Trial Division of an 'order' of the Costs Court constituted by a Costs Judge. Rules 63.56.1 to 63.57 do not, in terms, refer to an 'appeal' from a 'determination'. Moreover, those Rules only apply to an order allowing or disallowing some item in a bill or allowing some amount in respect of an item in a bill. The Costs Court did not make an order of any such kind in this case. It follows that, although Rule 63.57 may, perhaps, replace the right of appeal under s 17I of the Supreme Court Act 1986 with respect to an order made by a Costs Judge allowing or disallowing an item in a bill etc, that Rule does not replace s 17I (insofar as that section is otherwise applicable) in relation to the order the subject of the present appeal.

23 In this connection, the parties also made mention of Rule 77.06 of Chapter I of the Rules as that Rule stood in 2014 when this appeal was commenced. At the time, Rule 77.06 provided:

77.06 Appeals generally

Subject to section 17A of the Supreme Court Act 1986 and to Rule 16.5 of Chapter V of the Rules, an appeal from any judgment or order of an Associate Judge made under any Chapter of the Rules lies to the Trial Division constituted by a Judge of the Court, except in any case where an appeal lies to the Court of Appeal.

24 In Gadens Lawyers v Beba Enterprises Pty Ltd,[24] a case decided in 2012, a previous form of Rule 77.06 needed to be considered in the context of an appeal from the Costs Court. In 2012, by virtue of the express provisions of Rule 77.06(7), any appeal from an Associate Justice under Rule 77.06 fell to be heard and determined de novo. There was no equivalent of that express provision in the 2014 version of Rule 77.06 and its associated Rules. Otherwise, however, the two versions were relevantly similar. In Gadens, after expressing a view that the right to appeal from the decision of a Costs Judge is conferred by s 3.4.47 of the Legal Profession Act 2004 and noting, '[m]ore generally', the terms of s 17I of the Supreme Court Act 1986, Emerton J held that Rule 77.06 was applicable to an appeal from an order of a Costs Judge to a Judge of the Trial Division. Her Honour considered that Rule 77.06 (in its 2012 form) defined the nature of the appeal from the Costs Court. That is to say, her Honour determined that the appeal was an appeal de novo.

25 As mentioned above, by 2014, the provisions contained in Order 77 of the Rules relating to appeals from Associate Justices had been changed.[25] In AJH Lawyers v Mathieson Nominees Pty Ltd,[26] McDonald J proceeded on the basis that the 2014 version of the Rules governed the nature of the right of appeal created by s 17I of the Supreme Court Act 1986 and had the result that the appeal had become an appeal in the nature of a rehearing, rather than an appeal de novo. Indeed, such a view appeared to be common ground in that case. However, it is not fully clear to me that Rules 77.06 to 77.06.9 (inclusive), as then in force, were applicable to a judgment or order (or any other act) of the Costs Court constituted by a Costs Judge, notwithstanding that a Costs Judge must be an Associate Judge. Rather, I am inclined to think that those Rules were only applicable to a judgment or order of an Associate Judge given or made as an Associate Judge, not as a Costs Judge, at least where the Costs Judge was exercising power conferred by a statute such as the Legal Profession Act 2004. I am not sure that it can be said that a decision made by a Costs Judge in determining a costs review under s 3.4.40 of the Legal Profession Act 2004 constituted a 'judgment or order of an Associate Judge made under any Chapter of the Rules' within the meaning of Rule 77.06 as it stood in 2014.

26 On the other hand, it is tolerably clear that Rules 77.06 to 77.06.9 (inclusive) did not 'expressly' provide for an appeal from the Costs Court constituted by a Costs Judge. Hence they did not replace, or displace, the avenue of appeal conferred by s 17I of the Supreme Court Act 1986. Hence, in all the circumstances, I accept that I have jurisdiction to hear and determine this appeal under s 17I of the Supreme Court Act 1986, at least. I need not, and do not, decide whether s 3.4.7 of the Legal Profession Act 2004 or the former Rules 77.06 to 77.06.9 of Chapter I of the Supreme Court (General Civil Procedure) Rules 2005 are applicable.

27 I turn to the nature of the present appeal. The parties have proceeded on the basis that the appeal is in the nature of a re-hearing, whereby Mr Lotzof must demonstrate error on the part of the Costs Court. That is to say, the parties have proceeded on the basis that the appeal is not in the nature of a hearing de novo. That position remains common to the parties.

28 If, contrary to the view to which I am inclined, this appeal were in fact governed by the former Rules 77.06 to 77.06.9 (inclusive), then the joint position of the parties would be plainly correct.[27] If, on the other hand, those Rules do not apply, then the true nature of the right of appeal would turn on the proper construction of s 17I of the Supreme Court Act 1986 (and/or of s 3.4.47 of the Legal Profession Act 2004, as the case may be).[28] Nevertheless, I am not required to consider that question. Mr Lotzof accepted that this is an appeal by way of re-hearing and that he must show error on the part of the Costs Court. Kliger Partners took the same view and responded accordingly. It would be inappropriate for me to depart from the joint position of the parties in this regard.[29] I will not do so.

The evidence and the facts generally: debates over alleged concessions and alleged changes of position

29 In the Costs Court, considerable time was taken up with objections to evidence and with debates over whether, and to what extent, Kliger Partners had made concessions as to various matters. Echoes of some of those debates continued before me. Further, each party made claims before me that the other was attempting to depart from a position adopted below. Generally, it is preferable to defer any further mention of these issues until after I have outlined the relevant factual background, which I propose to do in a moment. However, I do need to say something now about one of these issues, in order to explain the way in which I will use the contents of a particular affidavit, namely an affidavit of Mr Block dated 25 March 2014, in the very process of outlining the relevant factual background.

30 Before the Costs Court, counsel for Mr Lotzof objected to paragraphs 3-12 (inclusive) of the affidavit of Mr Block dated 25 March 2014. Those paragraphs referred to instructions provided to Mr Block by Mr Lotzof. Initially, the objection was on two bases. First, it was said that insufficient particulars had been given as to the time of the instructions. Second, it was objected that the paragraphs used a 'narrative format', instead of setting out statements of the substance of relevant conversations.[30] Counsel for Kliger Partners accepted the first objection. However, he indicated that Mr Block would clarify in oral evidence that the instructions were given 'at the beginning of the retainer'.[31] Counsel rejected the second objection, arguing that, in the circumstances of this case, the paragraphs were appropriate as setting out matters of factual background. In reply, counsel for Mr Lotzof raised a further objection, asserting that the language of the paragraphs in question tended to give the erroneous impression that Mr Lotzof was giving instructions on his own behalf rather than on behalf of the company.[32] That gave rise to the following exchange:

[Counsel for Kliger Partners]: It is no part of our case that Mr Lotzof was our client. We have made that abundantly clear very formally to our learned friends. We say that he was a third party payer. And so when Mr Block says, "Mr Lotzof did this, Mr Lotzof did that", I won't be making any point that because it was he doing the speaking, therefore that necessarily entails him doing anything personally.

For the purposes of these paragraphs, all we're saying is that the person who said the words was Mr Lotzof.

His Honour: Was him.

[Counsel for Kliger Partners]: He might have been doing it on behalf of the company; he might have been doing it on his own behalf but really we say he was doing it on behalf of the company because it was the company who had the legal problem.

His Honour: Obviously the costs court can conduct itself according to the legislation with a degree of informality. I am content with Mr Block clarifying paragraphs 3 to 12. He can clarify when the events he is deposing so occurred.

[Counsel for Mr Lotzof]: He doesn't need to do that formally at this stage. If he's required to give evidence perhaps it will be done formally but at this stage I'm content to have it done from the Bar table.

When counsel for Kliger Partners said that the firm's position had been made 'abundantly clear very formally', he was referring to a letter dated 17 April 2014 which was not tendered before the Costs Court, but which was put before me by consent.[33] In that letter, under the heading 'Was your client our client?', Kliger Partners said:

We do not contend that Mr Lotzof was our client in the sense of a person to whom or [for] whom we provided legal services. Rather, we say he promised to pay our fees for acting for SecurEFT Pty Ltd or he should be estopped by his conduct from contending otherwise.

Counsel for Mr Lotzof submitted before me[34] that what counsel for Kliger Partners had conceded was that paragraphs 1-12[35] of Mr Block's affidavit amounted to 'part of the background information, that it would be used for a limited purpose only and would not be used for the purpose of asserting that my client entered into the costs agreement in a dual capacity'. Having regard to this submission, Mr Lotzof could not be heard to complain if I were to use paragraphs 1-12 of Mr Block's affidavit for the limited purpose of describing, by way of general background, the nature and the course of the differences that arose between Mr Lotzof's company and the other party with which it was in dispute; and I will draw on some of those paragraphs for that limited purpose. However, contrary to a further submission made by counsel for Mr Lotzof,[36] I do not accept that this part of the general factual background is irrelevant to the determination of the issues before me.

31 Mr Lotzof was a software developer. At all relevant times he was the sole shareholder in, and sole director and secretary of, SecurEFT Pty Ltd ('SecurEFT'). The company had no employees. It was under Mr Lotzof's exclusive control from the time of its registration in December 2008 until it went into liquidation on 7 August 2013.

32 In 2009 or 2010, SecurEFT commenced a lucrative relationship with the Australian betting agency, Sportsbet. SecurEFT made available to Sportsbet a software package to handle the payments made by punters placing bets on line with Sportsbet. It served a similar function to Paypal, which was a competitor.[37]

33 The relationship between SecurEFT and Sportsbet was governed by a written contract dated 17 July 2009[38] by which SecurEFT promised to create the payment system for Sportsbet in return for a relatively small establishment fee and then an ongoing percentage of each payment made through the system.[39] Unfortunately, the evidence does not include a copy of this contract, but SecurEFT asserted subsequently that the agreement included a promise by Sportsbet to use SecurEFT's payment system exclusively.[40]

34 SecurEFT controlled the monies paid by punters and then accounted for them to Sportsbet on a regular basis.

35 At some point in the first half of 2012, SecurEFT claimed that Sportsbet had breached the contract by allowing punters to pay for bets through competitors, including Paypal, resulting in a diminution of income for SecurEFT. After this situation arose, SecurEFT invoiced Sportsbet (for the first time) for certain services which, it claimed, it had performed at Sportsbet's request in 2011 and which, it claimed, were above and beyond the services required to be performed by it under the contract.

36 At around the same time, SecurEFT was withholding from Sportsbet over $320,000 in payments by punters, asserting that it was entitled to set those monies off against its claims in respect of loss and damage said to have been caused by Sportsbet's claimed breaches of contract, and also against the amount said to be owing to SecurEFT for the 2011 services.

37 Sportsbet acknowledged that it had changed its systems, thereby allowing punters to pay for bets through Paypal and other competing platforms, and that this had diminished Sportsbet's income. It is not clear whether Sportsbet conceded that this amounted to a breach of contract on its part. In any event, Sportsbet denied that SecurEFT was entitled to withhold, other than briefly, any of the payments made by punters through SecurEFT. Further, Sportsbet contended that the claim for the 2011 services was unmaintainable in that the services were already required to be performed by SecurEFT under the contract. In the alternative, Sportsbet contended that the claim was excessive in amount.

38 At an early point, as required by the contract, direct negotiations took place between employees of Sportsbet, on the one hand, and Mr Lotzof as the representative of SecurEFT, on the other, in an endeavour to resolve the differences between the companies. This was unsuccessful. Under the terms of the contract, the next steps provided were mediation and, if necessary, commercial arbitration.[41]

39 Mr Lotzof then approached Minter Ellison to act on behalf of SecurEFT. Minter Ellison had previously acted either for Mr Lotzof or for a company or companies controlled by him. However, it transpired that Minter Ellison were conflicted because they were acting for Sportsbet.

40 So far as relevant to the present proceeding, the subsequent history of the relations between SecurEFT, Mr Lotzof, Kliger Partners, Sportsbet and Minter Ellison may be divided into three parts. Those parts have been given various descriptions by the parties.[42] For the sake of adopting a neutral descriptive term, I will refer to the parts as the first, second and third stages.

41 The first stage began when, pursuant to a referral from a partner of Minter Ellison, Mr Lotzof approached Kliger Partners for assistance for SecurEFT. An initial consultation was held between Mr Block and Mr Lotzof on 9 July 2012. Although the individual who approached Kliger Partners and conveyed instructions about the company's relations with Sportsbet was Mr Lotzof himself, Mr Lotzof asserts, as I have already indicated, that those instructions were only conveyed by him in his capacity as the sole director of SecurEFT, and not in his personal capacity.

42 On 11 or 12 July 2012, Kliger Partners sent out, and Mr Lotzof saw, a letter of that date and enclosures, including a form of costs agreement, which are at the heart of this appeal. I will return to those documents.

43 On 16 July 2012, Sportsbet sent to SecurEFT a notice of breach and a notice of dispute under the terms of the contract.[43]

44 The remainder of the first stage comprised preparation for, and participation in, a formal mediation before a solicitor-mediator. Kliger Partners (under the supervision of Mr Block as the relevant partner) acted for SecurEFT in relation to the mediation. The mediation itself occurred on 9 August 2012. The outcome of the mediation was the drawing up of a document of the same date titled 'Points of Agreement'.

45 The second stage comprised negotiations between Sportsbet and SecurEFT, pursuant to clause 3 of the Points of Agreement, for a new contract to govern the future use and supply of the software package. These negotiations began shortly after the signing, on 9 August 2012, of the Points of Agreement. Again, Kliger Partners (under Mr Block) acted on behalf of SecurEFT. By early September 2012, the new contract negotiations had broken down. Sportsbet terminated the contract pursuant to the notice of breach and changed its systems such that, as from 7 September 2012, punters could no longer pay for bets through SecurEFT. By a letter from Minter Ellison to the Institute of Arbitrators and Mediators Australia - Victorian Chapter dated 12 September 2012,[44] which was sent pursuant to the terms of the original contract, Sportsbet referred what the letter described as 'the dispute' or 'the matters in dispute' to commercial arbitration in accordance with the Institute of Arbitrators and Mediators Australia Rules.

46 The third stage comprised preparation for, and participation in, the arbitration process and its aftermath. This stage extended from about 12 September 2012 until early May 2013. Kliger Partners (under Mr Block) continued to act for SecurEFT during this period. The firm briefed Mr Tatarka of counsel to appear for SecurEFT in the arbitration. Expert evidence was commissioned. Initially, it was expected that all of the issues the subject of the referral to arbitration would be heard and determined together. Subsequently, however, the arbitrator directed that there should first be a hearing on liability and later, if necessary, a hearing on damages and quantum. The liability hearing was fixed to commence on 17 April 2013, with a three day estimate. However, on the evening of 16 April 2013 an overall settlement was reached between Sportsbet and SecurEFT, through their respective legal representatives. The arbitrator's decision was issued on 2 May 2013, consistently with the terms of settlement. Kliger Partners continued to act for SecurEFT until 7 May 2013.[45]

Mr Lotzof: personal liability under a costs agreement?

47 The first issue is whether the Costs Court erred in deciding that Mr Lotzof, as an individual, was party to a costs agreement with Kliger Partners.

48 At the relevant time, the making of costs agreements was regulated by the Legal Profession Act 2004, especially Part 3.4. Section 3.4.2 contained the following definition:

costs agreement means an agreement about the payment of legal costs.

In s 1.2.1 of the Legal Profession Act 2004, it was provided that:

client includes a person to whom or for whom legal services are provided;

Section 3.4.2 defined 'third party payer' by directing attention to s 3.4.2A. So far as relevant, that section, in turn, provided:

3.4.2A Terms relating to third party payers

(a) a person is a third party payer, in relation to a client of a law practice, if the person is not the client and -

(i) is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client; or

(ii) being under that obligation, has already paid all or a part of those legal costs; and

(b) a third party payer is an associated third party payer if the legal obligation referred to in paragraph (a) is owed to the law practice, whether or not it is also owed to the client or another person; and

(c) a third party payer is a non-associated third party payer if the legal obligation referred to in paragraph (a) is owed to the client or another person but not the law practice.

(2) The legal obligation referred to in subsection (1) can arise by or under contract or legislation or otherwise.

(3) ...

Division 5 of Part 3.4 dealt specifically with costs agreements. So far as presently relevant, s 3.4.26 provided:

(1) A costs agreement may be made -

(a) between a client and a law practice retained by the client; or

(b) ...

(c) ...

(d) between a law practice and an associated third party payer.

(2) A costs agreement must be written or evidenced in writing.

(3) A costs agreement may consist of a written offer in accordance with subsection (4) that is accepted in writing or by other conduct.

Note:

Acceptance by other conduct is not permitted for conditional costs agreements - see section 3.4.27(3)(c).

(a) that it is an offer to enter a costs agreement; and

(b) that the client may accept it in writing or by other conduct; and

(c) the type of conduct that will constitute acceptance.

Section 3.4.30 provided, so far as relevant, that, subject to Division 5 (Costs agreements) and to Division 7 (Costs review by Costs Court), a costs agreement could be enforced in the same way as any other contract. Section 3.4.31 provided that a costs agreement that contravened, or was entered into in contravention of, any provision of Division 5 was void.

49 The material parts of the abovementioned letter from Kliger Partners dated 11 July 2012 were in the following terms:[46]

Anthony Lotzof

Secureft Pty Ltd

186-190 Lygon Street

CARLTON VIC 3053

Dear Sir

Dispute with Sportsbet

Thankyou for asking my firm to act for you in this matter.

Who will be working for you

(omitted)

Our fees

Under the Legal Profession Act and because it makes good commercial sense, I am obliged to tell you about the firm's charges. Details of my firm's charges for professional fees and disbursements and details of the conditions under which my firm works are set out in the enclosed Disclosure Statement and Costs Agreement (two copies).

Please take time to read my firm's Disclosure Statement and Costs Agreement (and the enclosed pamphlet "Getting the Best From Us"). If you have any questions, please let me know. I will be happy to discuss those matters with you after you have had the opportunity consider this letter and our Costs Agreement.

Otherwise, please sign and return a copy of our Costs Agreement. If you do not do so but still instruct me to act, I must assume that you agree to the conditions set out in the enclosed Costs Agreement.

Yours sincerely

(signed)

Anton Block

Principal lawyer/Accredited Mediator

KLIGER PARTNERS

50 The documents enclosed with the letter were numbered, in the bottom right hand corner, pages 1-9 (inclusive).[47] The enclosures comprised three interrelated documents. The first of them was of three pages and had the following heading:

Disclosure Statement & Costs Agreement - Litigious Matters

Reference Schedule

The Disclosure Statement and Costs Agreement attached are given by Kliger Partners.

as required by the Legal Profession Act 2004 ('the Act')

and this Reference Schedule forms part of those materials

This document ('the Reference Schedule') consisted principally of material set out in seven boxes designated items 1, 2A, 2B, 3, 4, 5 and 6 respectively. The entry in the box designated as item 1 was in the following form:

CLIENT

SECUREFT PTY LTD AND ANTHONY LOTZOF

of 186-190 Lygon Street CARLTON VIC 3053

ACN (if company) 134-501-885

The form of the entry in the box designated as item 2A was as follows:

Item 2B was set out on the same line as item 2A. The entry in item 2B was simply a matter number, namely 'ABB: 121936'. Item 3 set out the applicable hourly fee rates of the team members at Kliger Partners. Item 4 was headed 'Our estimated legal costs'. It stated, among other things, that Kliger Partners estimated the legal costs, including disbursements, for the work would be $5,000-$7,000 (plus GST). It stated that the estimate was not binding on Kliger Partners 'as the work required may change'. It indicated that the estimate was based on Kliger Partners providing advice, preparing and serving a notice of dispute and preparing for and attending a mediation. Items 5 and 6 contained seemingly standard form information about recovery of costs and liability for costs in court or tribunal proceedings. At the foot of the boxes, in bold type, the following appeared:

This Reference Schedule must be read together with the attached disclosure statement and costs agreement which, when read with this Reference Schedule, give full details of how Kliger Partners' legal costs are to be calculated and paid.

Beneath those words, this second page was dated 12 July 2012 and was signed for and on behalf of Kliger Partners.

51 The third page of the Reference Schedule was headed 'Acknowledgments & Agreements'. It stated that a 'Disclosure Statement' under the Legal Profession Act 2004 and a proposed 'Costs Agreement' were attached to the Reference Schedule. It contained a list of matters to be acknowledged by 'the Client', including that the Client had read the Disclosure Statement and had read and agreed to the Costs Agreement. It then contained provision for a date to be inserted and, immediately below that, provision for the inclusion, opposite the printed name 'ANTHONY LOTZOF', of Mr Lotzof's signature. Below that, there was another space for the insertion of a date and, immediately below that, provision for the document to be executed by 'SECUREFT PTY LTD in accordance with s 127 of the Corporations Act'. The block for execution by SecurEFT Pty Ltd included provision for signatures additional to the provision that had already been made for Mr Lotzof to sign the document opposite his printed name.

52 The second document in the bundle of enclosures was entitled 'Disclosure Statement - Litigious Matters'. It listed the 'Client(s)' as 'SECUREFT PTY LTD AND ANTHONY LOTZOF'. It described the 'Matter' as 'Sportsbet'. The matter number was given as '121936'. The Disclosure Statement included a section headed 'Your rights - Section 3.4.9(1)(b)'. Under that heading, clause 2.1 read:

You have the right to negotiate a costs agreement with us. (We offer to enter into a costs agreement with you as set out in the attached Costs Agreement and you may accept it by signing it and returning it to us or by orally telling us you accept it or by continuing to instruct us to act in this matter).

53 The third document, which comprised pages 7 to 9 of the bundle of enclosures, was headed 'Costs Agreement'. It identified the 'Client(s)' as follows: 'Person(s) and/or corporation(s) named in Item 1 of the Reference Schedule'. It identified the 'Matter' as: 'The Matter described in Item 2A of the Reference Schedule'; and it identified the matter number as the number set out in Item 2B of the Reference Schedule.

54 The Costs Agreement contained a section headed 'Preamble'. The Preamble stated that the 'disclosure statement' and the 'costs agreement' set out the terms on which Kliger Partners offered to undertake the work. It included the following sentence:

If you accept these terms the costs agreement and the disclosure statement will make up the complete costs agreement between us for this work.

This document is an offer to enter into a costs agreement. You may accept this costs agreement by signing and returning the copy of this document, or by orally telling us you accept it or by continuing to give instructions to us in this matter

55 Clause 16 of the Costs Agreement was entitled 'Multiple Clients'. It read as follows:

Where more than one person is named as the "client" in the heading to this costs agreement, each of those persons is a party to this agreement and agrees to be jointly and severally liable in regard to all of the obligations of "the Client" under this costs agreement. The validity of this agreement will not be affected if any of those persons does not sign this agreement or does not agree with it.

56 The letter and the enclosed documents were received by Mr Lotzof himself at the office of SecurEFT shortly after 11 or 12 July 2012.[48] In an affidavit filed before the hearing in the Costs Court, Mr Lotzof had said that he did not read the costs agreement. However, under cross-examination he said, initially:[49]

I didn't read it from cover to cover. I glanced at the first couple of pages and that was it.

There was then the following exchange:[50]

That is not what you said, is it? - - - I said I did not read that document.

But you did read it? - - - I read, as I said, the first couple of pages and glanced at it.

And you read the covering letter under which it was sent to you? - - - I do not recall.

Later in the cross-examination, Mr Lotzof acknowledged that he had seen, also, the third page of the Reference Schedule headed 'Acknowledgements and Agreements'. He had observed the format of that page, but he claimed that he did not realise that a distinction was being drawn between himself as a director of SecurEFT and himself as an individual.[51] All of this had happened at or about the time when the letter and the enclosed documents were received.[52]

57 The documents sent out by Kliger Partners as enclosures to the letter dated 11 July 2012 were not signed or otherwise executed by Mr Lotzof or by SecurEFT or by anyone on behalf of either of them, nor were they returned to Kliger Partners. However, during his cross examination before the Costs Court, Mr Lotzof gave the following evidence:[53]

Let me take it back a step. You didn't sign that contract. Did you ring up Mr Block or anyone else at Kliger Partners and say, "Yeah, yeah, that's fine" or accept it orally? - - - We proceeded so I would gather that the costs estimate is something I would have agreed to (indistinct).

Did you ring up anyone at Kliger Partners and say, "Yeah, that's fine"? - - - I do not recall but we proceeded so I must have.

So your evidence is that the company must have told Kliger Partners that their proposal was okay? - - - Yes.

And the company did so through you? - - - Yes.

So you rang up Kliger Partners and said "That's okay". Now, when I say that I am not asking you to admit that you did it in your personal capacity so that you were saying "That's okay with me because I know that you want me to pay the fees and I am happy to pay them". I am saying that you, were the person, the human being, who actually rang Kliger Partners or said something to Kliger Partners, it does not matter if it was over the telephone "That's okay"? - - - Yes.

So is it fair to say that it is your position in this proceeding, that the company did enter into a costs agreement in the terms of that document? - - - Yes.

And that it did so by you actually communicating on behalf of the company to Kliger Partners that the proposal was acceptable? - - - Yes.

58 In final submissions before Associate Justice Wood, counsel for Kliger Partners made only one reference to Mr Lotzof's evidence concerning the telephone call. Counsel said (referring initially to the second and third of the methods of acceptance provided for in the offer to enter into a costs agreement):[54]

We say that both of those were done, the costs agreement was accepted by the company through Mr Lotzof, through Mr Lotzof's oral acceptance of the costs agreement on behalf of the company and that it was accepted by his conduct, accepted by him personally through his conduct in his personal capacity.

This submission did not make clear whether Kliger Partners contended that the telephone conversation amounted to oral acceptance (by the second method) by Mr Lotzof personally of the offer to enter into the costs agreement.[55] Certainly, no such case had been advanced by counsel for Kliger Partners in his opening submissions to Associate Justice Wood. At that time, presumably, counsel for Kliger Partners had no specific information to support such a case.

59 Mr Lotzof's counsel addressed the Costs Court after the completion of his opponent's closing address. He made no express mention of the telephone call at all. Indeed, his submissions assumed that Kliger Partners had been relying only on the third potential method of acceptance, namely that of continuing to 'instruct' or 'give instructions' to Kliger Partners.

60 Apparently, Associate Justice Wood proceeded on the same assumption. In his reasons, his Honour did not expressly mention the telephone call either.

61 The telephone call was next mentioned in the notice of contention filed by Kliger Partners in relation to this appeal. Paragraph 1 of the notice of contention reads:

The determination that there was a costs agreement may be supported on the basis that the Appellant orally accepted the Respondent [sic] written offer by telephoning Anton Block of Kliger Partners, a mode of acceptance provided for in the offer.

62 Subsequently, Mr Lotzof filed an outline of submissions. In paragraph 29, his counsel submitted:[56]

The matters raised in ground 1 of the notice of contention are not sufficiently particularised to enable the Defendant to properly respond and do not seem to have been raised before the Associate Justice and cannot be raised on an appeal.

63 Next came an outline of submissions of Kliger Partners on the appeal.[57] The outline is 12 pages long. It contains four express mentions of the telephone call.[58] However, it does not address Mr Lotzof's submission that, before the Costs Court, Kliger Partners had not sought to rely on the telephone conversation as constituting oral acceptance, by the second potential method of acceptance, of the offer to enter into a costs agreement.

64 Later again, Mr Lotzof filed an outline of submissions in reply.[59] In paragraph 4, Mr Lotzof's counsel returns to the matter of the telephone call. The submissions contained in paragraph 4 are difficult to follow, but appear to be misconceived. They assert that the trial judge would not have been entitled to rely upon the telephone conversation 'because the passage was contained in paragraphs 1-12 of the affidavit of Anton Bloch [sic] dated 25 March 2014 (CB 284-286) that was admitted into evidence on a limited basis (see section 136 of the Evidence Act)'. One complete answer to that submission is that there was nothing in paragraphs 1-12 of the affidavit of Mr Block referring to the telephone conversation. The evidence about the telephone conversation came only later. It was oral evidence that had not been previously foreshadowed. Any agreement or concession relating to paragraphs 1-12 of the affidavit had no application to the evidence concerning the telephone conversation.

65 Next, during the oral hearing before me, counsel for Mr Lotzof referred to what he described as a concession made by counsel for Kliger Partners in the last of the passages of cross-examination set out above. He submitted that counsel for Kliger Partners had, in the course of asking Mr Lotzof questions about the telephone conversation, conceded that Mr Lotzof had not been acting in his personal capacity in communicating with Kliger Partners.

66 In oral submissions before me, counsel for Kliger Partners did not distinctly submit that his case before the Costs Court had included, even at the end, a contention that Mr Lotzof had, on his own behalf, orally accepted the offer to enter into the costs agreement in accordance with the second method of potential acceptance provided for in the offer. Indeed he did not make any clear oral submission to the effect that ground 1 of the notice of contention should be upheld. In the circumstances, I do not uphold ground 1 of the notice of contention.

67 On the other hand, counsel for Mr Lotzof endeavoured to make far too much of the three concessions to which I have referred. In my view, the respective concessions were, and were no more than, the following:

• that only SecurEFT, as distinct from Mr Lotzof, was a 'client' in the sense of 'a person to whom or for whom legal services are provided'[60];
• that paragraphs 3-12 (or 1-12) of Mr Block's affidavit of 25 March 2014 were not to be taken to support a conclusion that Mr Lotzof was a client in that particular sense; and
• that Mr Lotzof is not to be taken to have admitted, during the cross-examination relating to the telephone conversation, that he had been acting in his personal capacity in engaging in that telephone conversation.

As to the first and second of these points, the limited nature of the concessions is evident from the material referred to above under the heading: 'The evidence and the facts generally: debates over alleged concessions and alleged changes of position'. As to the third point, the limitation is obvious from the very words of the relevant exchange in cross-examination and is fully consistent with, and supported by, the position taken by Kliger Partners at all times in relation to the issues in this case, including, in particular, its contention that Mr Lotzof accepted the offer in his personal capacity by conduct, being conduct of a kind specified in the offer, namely by continuing to instruct or give instructions to Kliger Partners.[61] Mr Lotzof may not have admitted acting in his personal capacity, but that does not mean that he cannot be taken to have so acted.

68 The upshot is, in my opinion, that the telephone call is not to be completely ignored but that it is of limited significance. Kliger Partners cannot be heard to contend that Mr Lotzof, personally, accepted the offer by the second method. It can only rely on the third method. On the other hand, even though the Associate Judge did not refer to the telephone call, Kliger Partners is entitled to draw attention to it in support of its submissions based on the third method. In that regard, however, Kliger Partners' case hardly needs to draw upon the telephone call. There can be no doubt that, from the outset, Kliger Partners was duly authorised to carry on with its legal representation of SecurEFT. Further, Mr Lotzof himself was the one and only human being who physically conveyed that authorisation. Whether he did it by means of the phone call in question or by other means does not really matter. There is no doubt that the offer to enter into the costs agreement was accepted by SecurEFT, at least. The question is whether the Associate Judge was right or wrong to conclude that the offer was accepted not only by SecurEFT but also by Mr Lotzof in his personal capacity.

69 Grounds 1-9 and 12-15 of the notice of appeal are directed to the issue of Mr Lotzof's personal liability. Some of those grounds overlap. This part of this judgment would be unduly extended if I were to recount in detail each and every complaint made by Mr Lotzof in relation to the reasoning of the Costs Court. And the exercise would not be worthwhile. Many of the complaints are either misconceived or lead nowhere. Moreover, on the established facts and the undisputed evidence in this case, Mr Lotzof was and is bound to fail on the question of personal liability.

70 The written offer made by Kliger Partners, on its face, plainly envisaged that, upon acceptance, both SecurEFT and Mr Lotzof personally would be parties to the ensuing costs agreement. Each was separately identified, not only by being named individually as 'Client(s)', but also in that provision was made for the signing of the proposed costs agreement by Mr Lotzof personally and separate provision was made for execution by SecurEFT. The first sentence of clause 16 of the proposed costs agreement spelt out in unmistakable terms that each of the persons named was to be a party to the agreement.[62] It is true that the second sentence of that clause contemplated the possibility that a proposed party would not in fact become a party if that person 'does not sign this agreement or does not agree with it'. However, the general or usual arrangement proposed was the arrangement spelt out so clearly in the first sentence of clause 16. Moreover, in the present case, the self-same human being, namely Mr Lotzof, was solely responsible for responding to the offer on behalf of SecurEFT and himself as offerees. If there was to be any differentiation or distinction made between the two offerees in their response to the offer, it fell to Mr Lotzof to point this out to Kliger Partners in his response to the offer. He did not do so. Instead, after the offer had been sent and received and after it had been read by Mr Lotzof (at least in part),[63] Kliger Partners continued to be instructed. Physically, it was Mr Lotzof himself who, shortly after the receipt of the offer, contacted Kliger Partners, apparently by telephone, and instructed the firm to proceed. There was no time gap of any significance. The reasonable person in the position of Kliger Partners would have been fully entitled to conclude, from Mr Lotzof's outward conduct, that Mr Lotzof was conveying assent to the entirety of the offer, not merely part of it; and thus to conclude that both of the offerees had assented to the proposed terms and accepted the offer. Mr Lotzof has never suggested that the costs agreement did not bind SecurEFT. If it bound SecurEFT, then, in the circumstances, it bound Mr Lotzof too. In substance, the same view was taken by Associate Justice Wood.[64]

71 Ground 3 of the notice of appeal is expressed as follows:

The Associate Justice erred in construing the terms of the costs agreement as binding the defendant in a personal capacity.

That bald assertion is unenlightening. Purported particulars of ground 3 are set out in Mr Lotzof's outline of submissions dated 26 September 2014. However, as counsel for Kliger Partners submitted in response,[65] those particulars are incomprehensible and ascribe to paragraphs of the Associate Judge's reasons characteristics which they simply do not have. Nothing was said by counsel for Mr Lotzof in oral argument to clarify or support ground 3.

72 Ground 1 of the notice of appeal accuses the Costs Court of having 'failed to construe the terms of the costs agreement in an objective manner'. This contention is developed in ground 2 and in the submissions advanced by Mr Lotzof under grounds 1 and 2. These grounds and submissions are oddly framed, as the real question is not one of construction of the terms of the costs agreement. Rather, the real question is whether Mr Lotzof ever became a party to the costs agreement. In other words, the real question is whether a contract (in the form of the costs agreement) was ever formed between Kliger Partners and Mr Lotzof. To be even more specific, in the circumstances of this case, the real question is whether Mr Lotzof, in his personal capacity, accepted the offer. In a leading text on contract law, it is stated that:[66]

Whether or not there is acceptance is determined objectively by reference to the words or actions of the offeree.

I accept that proposition. But my analysis of this case, as set out above, is squarely in accordance with the objective test. To reiterate that analysis, whatever may have actually been in Mr Lotzof's subjective mind or in the subjective mind of Kliger Partners, a reasonable person in the position of Kliger Partners would have been fully entitled to conclude, from Mr Lotzof's outward conduct in mid-July 2012, that Mr Lotzof was conveying to Kliger Partners that both he and SecurEFT were accepting the offer in its entirety. I reiterate also that, in my view, the same analysis was included in Associate Justice Wood's reasoning.

73 Under grounds 12, 13, 14 and 15, Mr Lotzof contends that Associate Justice Wood wrongly had regard to events subsequent to the initial interaction between the parties in mid-July 2012, and wrongly considered the subjective mind or intention of Mr Lotzof in determining whether he accepted the costs agreement. Let it be assumed that Associate Justice Wood did have regard to subsequent events and did make an assessment as to whether or not Mr Lotzof believed himself to be liable under the costs agreement. And let it also be assumed, but by no means decided,[67] that those subsequent events and the state of Mr Lotzof's subjective mind (as at any time) were irrelevant for the purpose of deciding whether a contract (in the terms of the costs agreement) was formed between Kliger Partners and Mr Lotzof. Those things would matter not. In my opinion, his Honour had in effect already applied the objective test to the facts and the evidence, and had thereby appropriately found against Mr Lotzof on the present issue.[68] Further, even if, contrary to my opinion, Associate Justice Wood did not apply the objective test, nevertheless, as I have already indicated, it is clear to me that, on the application of the objective test to the established facts and undisputed evidence in this case, Mr Lotzof was a party to the costs agreement in his personal capacity.

74 Hence none of grounds 1, 2, 12, 13 or 15 of the notice of appeal can avail Mr Lotzof, on any view.

75 In paragraphs 8 and 9 of the notice of appeal, Mr Lotzof contends that the Associate Judge erroneously held that Mr Lotzof was bound by a mode of acceptance that was not specified in the costs agreement. Mr Lotzof relies in this regard on paragraph 29 of his Honour's reasons in which his Honour said:

The applicant relied on a number of authorities. Empirnall Holdings Pty Ltd v Machon Paul Partners Pty Ltd[69] was relied upon in support of the proposition that assent can be inferred from all the circumstances even though no contract was signed. It is open to find that acceptance of services after a reasonable opportunity to reject them could be construed as acceptance of the terms offered. The appropriate test is whether the "reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted".[70]

In paragraph 29 of the Reasons, Associate Justice Wood was merely summarising the effect of one authority, namely Empirnall, which, among other several other authorities, had been cited by Kliger Partners in general support of its case in the present respect. And, in my view, Empirnall did generally support Kliger Partners' case in the present respect, as, indeed, did the other authorities cited by Kliger Partners in this regard.[71] However those things may be, at all times it was Kliger Partners' case that Mr Lotzof had adopted the third of the available methods of acceptance of the offer by continuing to give instructions to Kliger Partners in circumstances which would indicate to any reasonable recipient of the instructions that Mr Lotzof was doing so in his personal capacity, as well as on behalf of SecurEFT.[72] In substance, that was the case that was accepted by Associate Justice Wood[73] and it is the case which I also accept.

76 I note that the expression 'to give instructions', which appears in the preamble to the document entitled 'Costs Agreement', can be used in two senses - first, in the sense of to authorise a lawyer to act and, second, in the sense of to provide relevant information to one's lawyer for the lawyer to use on one's behalf. The first of these two senses is obviously the sense in which the expression 'to give instructions' is used in the Costs Agreement. That is confirmed by the fact that, in other places in the interrelated documentation which comprises the offer, the expressions 'instruct me to act'[74] and 'instruct us to act'[75] are used in the corresponding context. Appropriately, this distinction was made by counsel for Kliger Partners before the Costs Court,[76] and it was maintained on the appeal. At all relevant times, Kliger Partners has contended that Mr Lotzof acted personally in 'giving instructions' in the first sense of that term, although he acted on behalf of the company in 'giving instructions' in the second sense of the term. The Costs Court accepted that contention and so do I.

77 Pursuant to grounds 4, 5 and 6, Mr Lotzof submitted, in effect, that because the proposed costs agreement described him as a 'client', whereas he was not a 'client' properly so called, the offer to enter into the costs agreement should not be interpreted as having extended to him. In consequence, he submitted, the costs agreement did not bind him. If he was to be made liable to pay the relevant legal fees, he submitted, the proper description for him would have been 'third party payer' not 'client'. He submitted that it is not possible to be a 'client' and a 'third party payer' at the same time in respect of the same matter. That situation was not affected, he submitted, by the fact that the definition of 'client' in the Legal Profession Act 2004 was inclusive rather than exhaustive. He submitted that, insofar as Associate Justice Wood took a different view in that regard, his Honour was in error. He disputed a submission which had been made on behalf of Kliger Partners to the effect that, in any event, Mr Lotzof could be regarded as a client within the 'colloquial' meaning of the word 'client'. He submitted that the word 'client', when used in a costs agreement governed by the Legal Profession Act 2004, should be taken to have the same meaning as it has in the Act. Merely calling him a 'client' in the agreement did not make him a client in the statutory sense or in any other sense, he submitted. He said that the form of a costs agreement should be in accordance with the Act. In addition, he submitted that the references in the documents to the possible liability of the 'client' to pay costs to Sportsbet indicated that he, personally, was not covered given that he, personally, was not in dispute with Sportsbet; and insofar as Associate Justice Wood reasoned that Mr Lotzof, as the sole controller of SecurEFT, could conceivably be ordered to pay costs, personally, to Sportsbet, his Honour erred, because an arbitrator would not have the power to so order.

78 I need not, and do not, decide whether, by virtue of the inclusive nature of the definition of 'client' in the Act, the definition could extend to a person who also falls within the definition of 'third party payer'. Even if the use of the word 'client' in the costs agreement involves some disharmony with the Act, such disharmony does not avail Mr Lotzof. Mr Lotzof has not submitted, and could not possibly submit, that the costs agreement 'contravenes' any provision of Division 5 of Part 3.4 of the Legal Profession Act. Thus he does not submit, and could not submit, that the costs agreement is rendered void by s 3.4.31 of the Act. The costs agreement does not expressly incorporate the statutory definition of 'client'. Even if the statutory definition excludes a 'third party payer' and even if the definition should be read as having been expressly or impliedly incorporated into the costs agreement, nevertheless it should be read as subordinate to the express language of the agreement itself, to the extent of any conflict.[77] And there would indeed be a stark conflict with the express terms of the costs agreement - in particular, with the separate naming of Mr Lotzof as a party, with the separate provision for his signature and with the terms of clause 16, as set out above. In any event, the references in the offer documents to possible liability for costs were not necessarily inapplicable to Mr Lotzof personally. As Associate Justice Wood said, it was conceivable that an order for costs might at some stage be made against Mr Lotzof personally as the sole controller of SecurEFT.[78] I express no view as to whether or not an arbitrator would have the power, under s 33B of the Commercial Arbitration Act 2011, to make an order for costs against a person in Mr Lotzof's position, but there is no doubt that, if the matter had found its way to a court, the court would have possessed the requisite power. As mentioned above, the references in the costs agreement to possible costs liabilities were seemingly in standard form. Their presence does not diminish the clarity of the meaning of the offer, read as a whole, with respect to the identification of the proposed parties. That meaning remains crystal clear. Mr Lotzof was to be 'jointly and severally liable in regard to all of the obligations of 'the client' under this costs agreement'.[79]

79 Even if, as Mr Lotzof submitted under ground 7,[80] a strict construction should be applied to an offer or agreement which, as in this case, was drawn up by a legal practitioner and is relied upon by the legal practitioner in a claim for fees, whereby any ambiguities should be construed in favour of the client, still the result would be the same. So far as presently relevant, the written offer made to Mr Lotzof was clear and unambiguous. Mr Lotzof's own conduct, in continuing to give instructions to Kliger Partners, plainly amounted to acceptance of the offer by him in his personal capacity.

80 For the reasons I have stated so far, I would not disturb the holding of the Costs Court that Mr Lotzof, as an individual, was party to the costs agreement with Kliger Partners.

Did the costs agreement extend to the work in question?

81 The second issue was dealt with by Associate Justice Wood in a single paragraph, as follows:[81]

The respondent also advanced an argument that the scope of the work was only up to the mediation. This argument derives from the fact that the disclosure material contains an estimate of fees up to that point only. At the time of the estimate the mediation was imminent. However, the scope of the retainer was described in broad terms as "Dispute with Sportsbet". Work continued further in relation to Sportsbet which ultimately led to an arbitration. The agreement clearly covers all work in relation to the dispute. The estimate given in compliance with disclosure obligations does not define the scope of the work. The Costs Agreement does.

82 Grounds 10 and 11 of the notice of appeal attack this part of his Honour's decision. Those grounds are expressed as follows:

1. The Associate Justice erred in construing the scope of works in the costs agreement as applying to all of the work performed in the matter.

Particulars

The Associate Justice misread the terms of the costs agreement in holding that the scope of works and the estimated costs of mediation was not specified therein.

The Associate Justice misread the costs agreement in holding that the scope of works was determined by reference to the description of the matter.

The Associate Justice erred in failing to take into account the disclosure statement, which he held was part of the costs agreement (as it was one of the documents produced in July 2012.

1. The Associate Justice erred in failing to consider the surrounding circumstances around the costs agreement.

Particulars

The Associate Justice refused to consider the scope of works by reference to the disclosure statement.

The Associate Justice failed to consider the scope of works as discussed by the parties and by reference to the work that was being currently undertaken (the mediation), and which was separate and distinct, from the work subsequently undertaken in the arbitration.

83 Some parts of Mr Lotzof's submissions under these grounds may be accepted.

84 I would accept that, speaking generally, the true construction of the costs agreement is capable of being affected by the terms of the disclosure statement. The two documents were not separate and distinct. They were tied together by several things, including that they were part of a continuously paginated bundle of documents; that they both mentioned the Reference Schedule; that the Reference Schedule, in turn, declared itself to be, and in fact was, a schedule to both the disclosure statement and the costs agreement; and, moreover, that the costs agreement expressly incorporated the disclosure statement as part of the costs agreement. As to the latter point, the preamble to the costs agreement recited that it and the disclosure statement set out the terms on which Kliger Partners offered to undertake the work, and the preamble continued:

If you accept these terms the costs agreement and the disclosure statement will make up the complete costs agreement between us for this work.

Likewise, clause 22.2 of the costs agreement provided that the information in the disclosure statement was 'a term or condition of this costs agreement'. On the other hand, these features of the documents in question were odd, because the disclosure statement, itself, contained little or nothing that would normally be regarded as being in the nature of a term or condition. In itself, the disclosure statement was not promissory in nature. Rather, as the name suggests, its principal function was to disclose information.

85 I would also accept that, in order to identify the subject matter of the costs agreement or the purpose or object of the transaction underlying it, or to resolve ambiguity in the written terms of the costs agreement, regard may be had to relevant objective surrounding circumstances which were known to the parties at the time of the making of the contract.[82] As Mr Lotzof submits, principles along those lines were applied by Hasluck J in Harrison v Hocking in considering an issue about the scope of a costs agreement which had been made under corresponding Western Australian legislation.[83]

86 For the purposes of the present issue, the critical question is whether, on its true construction, the costs agreement only covered the work done up until the mediation or whether it also encompassed the work done in relation to the arbitration. In this regard, Mr Lotzof emphasises the contents of item 4 of the Reference Schedule. As mentioned above, that item is entitled 'Our estimated legal costs'. It reads:

We estimate that your legal costs, which include legal fees, disbursements and fees for office services, for this work will be $5,000 to $7,000 (plus GST).

This estimate is not binding on us as the work required may change.

This estimate is required to be given to you by the Act and is based on our understanding of the present circumstances. If this estimate or the scope of this work changes, we may need to revise this estimate. For example, this estimate is based on us providing advice, preparing and serving notice of dispute and preparing for and [attending] mediation. If the matter settles before mediation, your costs may be less than this estimate, although that may not be so.

The major variables that will affect the calculation of these costs are described in Appendix A set out at the end of the disclosure statement.

87 Mr Lotzof also submits[84] that the narrower construction for which he contends is supported by evidence contained in the affidavit of Mr Block sworn 25 March 2014, to the effect that it was apparent to Mr Block at the initial consultation with Mr Lotzof on 9 July 2012 that the dispute was eminently capable of being resolved by mediation.[85] It is not completely clear from his affidavit that Mr Block's belief was conveyed to Mr Lotzof during their first consultation on or about 9 July 2012, but counsel for Kliger Partners did not object to his opponent's reliance on this evidence for the purpose of construing the costs agreement. Accordingly, I will assume in favour of Mr Lotzof that the evidence is admissible on the point of construction.

88 In his written submissions on this appeal,[86] counsel for Mr Lotzof also relied, for the same purpose, on paragraphs 7(a)-(c) of an affidavit sworn by Mr Block on 18 November 2013 in the Magistrates' Court proceeding, a copy of which was made exhibit 'EM 7' to the abovementioned affidavit of Emily Marson affirmed on 10 February 2014 and filed on behalf of Kliger Partners in this appeal. However, the abovementioned 'Guide to the Appeal Books' indicates that large parts of the affidavit of Emily Marson and large parts of the exhibited affidavit of Mr Block dated 18 November 2013, including paragraphs 7(a)-(c) thereof, were not read before the Costs Court and were not to be read or relied upon in this appeal. I may have misunderstood the Guide in that respect, but in any event, the paragraphs in question would not add anything to what was contained in Mr Block's affidavit of 25 March 2014 in this regard.[87]

89 Counsel for Mr Lotzof further relies on the mutually adopted separation into three parts of the interactions between the persons and companies concerned. As mentioned above, for the sake of using a neutral descriptive term, I have referred to those three parts as 'stages'. In his written submissions,[88] counsel for Mr Lotzof said that, before the Costs Court, his opponent had 'even characterised the process as having 3 phases that consisted of mediation, to contract negotiation to arbitration...and which must be regarded as being separate and distinct from each other'.

90 The actual words used by counsel for Mr Lotzof in that written submission are noteworthy. It appears that counsel's words were carefully chosen. Counsel said that his opponent had, before the Costs Court, characterised 'the process' as having had three 'phases'. Generally speaking, a process with three phases remains a single process. Counsel for Mr Lotzof could have chosen to go further in this regard. At this point, he could have said, with complete accuracy, that, before the Costs Court, his opponent had characterised the process as having involved three separate retainers of Kliger Partners in relation to three separate 'matters'.[89] But counsel for Mr Lotzof did not do so. Indeed, later, in his written reply dated 6 March 2015, he appeared to contend that his opponent had not in fact submitted to the Costs Court that there had been three retainers for 'matters'.[90] In any event, by the word 'matter', counsel for Kliger Partners had meant, as he explained in the Costs Court, not what the parties had described as the 'Matter' in the costs agreement, but rather 'matter' in the sense in which that word was used in Division 3 of Part 3.4 of the Legal Profession Act 2004. That Division regulated the costs disclosure obligations of law practices. Counsel for Kliger Partners did not spell out to the Costs Court what he contended to be the statutory meaning of 'matter', but he did refer in this regard to Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd,[91] where, in relation to the expressions 'a matter' and 'the matter' appearing in the corresponding parts of the corresponding legislation of New South Wales, Austin J had expressed the opinion that '...those words refer to the subject matter of the solicitor's retainer, that is the client's cause or transaction on which the solicitor, for reward, is instructed to advise or act'. Counsel for Kliger Partners had contended that the Costs Court should only take into account any non-disclosure in relation to the 'matter' to which the relevant bills of costs related; and that the bills of costs in question in this case did not relate to the first 'matter' or to the second 'matter'. Of course, the submission by counsel for Kliger Partners that there had been three 'matters' (in the statutory sense) had only been put by way of response to claims that had been made by Mr Lotzof as to alleged non-disclosure by Kliger Partners. Thus the submission was directed to what I have called the fourth issue (to which I will come later) not to the second issue. This may well explain the abovementioned choice made by counsel for Mr Lotzof to frame his written submissions in the way he did in the present respect, the more so because the claims of Mr Lotzof to which counsel for Kliger Partners had been responding included a claim that Kliger Partners had been obliged at the very beginning to make disclosure in relation to Mr Lotzof's and SecurEFT's potential liability (to Kliger Partners and to Sportsbet) for legal costs up to and including the commercial arbitration stage.[92] Consistently with this approach, ground 10 of Mr Lotzof's notice of appeal[93] had referred to all of the work performed in 'the matter'; and, likewise, the second paragraph of the particulars under ground 10 had referred to the description, in the costs agreement, of 'the matter' and contrasts this with the so called 'scope of works'. Later, however, during oral argument before me, counsel for Mr Lotzof appeared to change course to some extent. He submitted that once the mediation had been completed, the retainer pursuant to which the 11 July 2012 letter had been sent expired and a new retainer must have been entered into for the future work.[94] I will return to this debate when I come to the fourth issue.

91 In any event, the proper construction of a contract is a question of law.[95] The Court is not confined to the interpretations suggested by the parties in the case at hand. Moreover, a contract is to be interpreted as at the time of its making, i.e. according to the meaning it would have conveyed to a reasonable person having all the background knowledge which would reasonably have been available to the parties 'in the situation in which they were in at the time of the contract'.[96] Generally speaking, it is not legitimate to use as an aid in the construction of the contract anything the parties said or did after it was made.[97]

92 In my view, any indications in favour of the narrower construction of the costs agreement that may be discernible from item 4 of the Reference Schedule or from the affidavit evidence of Mr Block or from the divisibility into three parts of the events which took place after the making of the costs agreement are, in my view, vastly outweighed by clear indications to the contrary.

93 First of all, the expression 'litigious matters' appears in the very heading of the Reference Schedule. That expression alone tends to indicate that the parties should be taken to have been contemplating that the costs as to which agreement was being made might include costs of litigation.

94 It is true that the costs estimate given in item 4 of the disclosure statement 'for this work' was only $5,000 to $7,000 (plus GST), whereas ultimately Kliger Partners billed Mr Lotzof for a total sum in excess of $80,000. However, item 4 proceeds to inform the reader that the estimate is not binding on Kliger Partners 'as the work required may change'; that the estimate is based on 'an understanding of present circumstances'; and that if 'the scope of this work changes', a revised estimate may be needed. Indeed, the reader is specifically informed by item 4 that the estimate is based on anticipated work up to and including a mediation. Item 4 also states that the 'major variables' that will affect the calculation of the costs are set out in Appendix A to the disclosure statement. Appendix A, in turn, refers to many variables, the majority of which assume that the work will be done in relation to proceedings in a court, not just in relation to a mediation.[98]

95 What item 4 envisages in the event that the scope of the work changes is the provision of a revised estimate, not the creation of a new costs agreement.

96 In stating that the scope of the work may change and that, if it does, a revised estimate may be needed, item 4 is clearly referring to some 'driver' that is not explicitly mentioned in item 4 itself. That driver was, of course, the thing or the problem about which legal advice and assistance was being sought from Kliger Partners. That problem or thing was identifiable from Item 2A of the Reference Schedule, and thus from the costs agreement itself, as 'Matter: Dispute with Sportsbet'. In the disclosure statement, it was simply described as 'Sportsbet'. It is entirely natural and reasonable to interpret the costs agreement overall as being an agreement about the way in which Kliger Partners would calculate their costs in acting for and assisting SecurEFT in relation to the thing or problem thus identified.

97 As indicated above, the surrounding circumstances may be taken into account in considering what the expression 'Dispute with Sportsbet' should be taken to comprehend.[99] I have already described the substantive issues which, to the knowledge of all concerned, existed between SecurEFT and Sportsbet at the time when Mr Lotzof first consulted Mr Block. Those issues arose directly out of the commercial agreement between SecurEFT and Sportsbet which provided for any dispute arising between the parties to be referred to commercial arbitration, if not previously resolved. The costs agreement, in turn, falls to be construed as at the time it was entered into.

98 Somewhat surprisingly, in my view, albeit apparently with an eye, again, to the fourth issue (disclosure), counsel for Kliger Partners initially submitted before me[100] that the dispute became quite a different dispute after Sportsbet terminated the contract. He submitted initially that this did not prejudice the position of Kliger Partners in relation to the present issue because, he said, the expression 'Dispute with Sportsbet' covered any dispute with Sportsbet, not just the dispute with Sportsbet as it existed originally. A little later in the hearing before me, counsel for Kliger Partners changed tack.[101] He had by then noticed the letter from Minter Ellison dated 12 September 2012 by which the submission to arbitration was effectuated.[102] Counsel then submitted that that letter made it clear that the dispute as identified in paragraphs 1-12 of Mr Block's affidavit of 23 March 2014 was the same dispute as the one that had been referred to arbitration. He withdrew the submission to the contrary that he had previously made.

99 I would not have accepted that the expression 'Dispute with Sportsbet' extends to any dispute with Sportsbet. Rather, in my opinion, the expression refers to the general dispute as it was presented by Mr Lotzof to Mr Block during their original consultation. However, the dispute as so presented, which has already been described above, was a dispute of significant dimensions. In my view, the dispute, or at least the matters in dispute, did not change significantly after the costs agreement was entered into, albeit that Sportsbet subsequently issued a notice of breach and later acted on the notice by terminating the contract. Those steps were expressly provided for by the contract. Moreover, the notice of breach pursuant to which the contract was terminated was based on the very things that were originally in dispute between the parties and about which Mr Lotzof had consulted Mr Block on or about 9 July 2012. I note that counsel for Mr Lotzof - although he submitted that the meaning of 'Dispute with Sportsbet' should be limited to the mediation stage on the basis that it should be read in the context of what he designated the 'scope of works' provided for in item 4 - did not go so far as to submit, either before the Costs Court or this Court, that the expression 'Dispute with Sportsbet', in itself, was not capable of applying to the dispute that was referred to arbitration.[103]

100 It is evident from the reasons of Associate Justice Wood that his Honour took the view that there was only one dispute and only one 'matter', whether in the sense in which that word was used in the costs agreement or, if there be any difference, in the sense in which it was used in Part 3.4 of the Legal Profession Act 2004. I will return to that latter point when I come to deal with the disclosure issue, but, as will be apparent from what I have already written and from what I will further write in relation to the disclosure issue, I agree with Associate Justice Wood in both respects.

101 Associate Justice Wood was correct to conclude that the costs agreement extended to the work done by Kliger Partners that was the subject of the bills in question.

The enforceability of the costs agreement and the question of consideration

102 As indicated in the introductory part of this judgment, the parties were at loggerheads, at least for a time, even as to what the Costs Court actually decided in relation to what I have described as the third issue. However, it is clear to me that, so far as presently relevant, the Costs Court decided, only, that the costs agreement was not unenforceable against Mr Lotzof for want of consideration. Moreover, in coming to that decision the Costs Court was plainly correct.

The Associate Justice erred in ruling that the costs agreement was enforceable as it prevented the Defendant from applying to set aside the costs agreement, which was not an issue in the hearing.

104 In his written submissions,[104] counsel for Mr Lotzof asserted under ground 17 that the Associate Judge had decided that the costs agreement was enforceable 'thereby precluding the Defendant from applying to have the costs agreement set aside'. A reference was given at that point to what counsel for Mr Lotzof himself had said in the early stages of the hearing before Associate Justice Wood.[105] The written submission went on to say, by reference to certain incidental findings made by Associate Justice Wood in the course of construing the costs agreement, that his Honour had thereby bound the parties and precluded Mr Lotzof from contending, subsequently, that he had entered into the costs agreement pursuant to a mistake or as a result of undue influence or unconscionable conduct.

105 In paragraph 2 of the notice of contention filed by Kliger Partners, it was said:

The determination that the costs agreement was enforceable may be (and the Respondent concedes that it should be) read, in the context of the ambit of the hearing which was resolved in oral argument at its commencement, as a finding that the costs agreement was not void ab initio for non-compliance with the Legal Profession Act 2004, and not as a determination that the costs agreement is not voidable for some other reason.

106 In the written submissions filed on behalf of Kliger Partners[106] it is submitted that ground 17 is predicated on the fallacy that the Costs Judge found that the costs agreement was enforceable generally, whereas, in fact, he did not do so.

107 It is true that some of Mr Lotzof's foreshadowed defences, such as mistake, undue influence and unconscionable conduct, if upheld, might have led to a determination that the costs agreement was unenforceable. Further, at some stage during the abovementioned abortive exchanges of proposals for preliminary questions that took place prior to the hearing in the Costs Court, it was apparently suggested by Kliger Partners' lawyers that one of the preliminary questions be whether the costs agreement was 'enforceable'.[107] However, that suggestion may have been based on a quite different understanding of what might have made the costs agreement enforceable or unenforceable, perhaps some perceived question relating to whether the costs agreement complied with the Legal Profession Act 2004.[108] These exchanges may have been on the mind of counsel for Mr Lotzof when he said what he did in the early stages of the hearing before Associate Justice Wood, as mentioned above.[109] But these were no more than brief, preliminary, passing remarks. They were overtaken by events. Apart from those remarks, and apart from the submissions made by the parties on the question of Mr Lotzof's personal liability and on the question of costs disclosure, neither side addressed any arguments or submissions to the Costs Court on any topic that might have affected the enforceability of the costs agreement, except one. That topic was whether or not the costs agreement was supported by consideration.

108 It is true that, in paragraph 4 of his reasons, Associate Justice Wood said:

The parties agreed at the hearing on 23 April 2014 that there are two broad preliminary questions to be determined before the matter advances any further. The first question has three parts - is there a costs agreement between the applicant and the respondent, if so, is it enforceable and if so, what are its terms? ("the first question").

However, his Honour did not ask himself whether the costs agreement was 'enforceable' generally. Rather, in that regard, he confined himself to the single matter that had been argued in that respect, namely the consideration point. Certainly, his Honour made no reference to any such thing as mistake or undue influence or unconscionable conduct. Nor, for that matter, did his Honour say anything as to whether or not the costs agreement was unenforceable for non-compliance with the Legal Profession Act 2004. Rather, the entirety of what his Honour said, so far as presently relevant, was as follows:

1. The parties briefly addressed the question of consideration. The respondent argues that the contract was unenforceable due to the absence of consideration because he did not receive the benefit of legal services and their provision was not dependent upon him agreeing to guarantee them. The better view is that the respondent derived benefit given his connection to the company and the consideration was the provision of legal services by the applicant on the promise to pay.
2. The answer to the first question is that there is a Costs Agreement between the applicant and the respondent in his personal capacity. The terms are contained in the documents that were produced in July 2012 and it is enforceable.

There is nothing in those paragraphs which suggests that his Honour's finding as to enforceability travelled beyond the question of consideration.

109 It is true that, in paragraph 3 of his Honour's order made on 20 June 2014, it was ordered that:

The question 'Is any such costs agreement enforceable in the sense that it was not void ab initio?' be answered 'Yes'.

The inclusion of the words 'in the sense that it was not void ab initio' appears to have resulted from the wholesale adoption of the draft order submitted by Kliger Partners, as discussed above. However, those words do not make paragraph 3 of the order inapt as an order based solely on the consideration point. An agreement that is unenforceable for want to consideration is, of course, void ab initio. Nevertheless, to put the matter beyond doubt, I propose to order on this appeal that the words 'for want of consideration' be added immediately prior to the question mark in paragraph 3 of the order.

110 I should add that, in the oral submissions before me, nothing was said by counsel for Mr Lotzof in support of ground 17 and nothing was said by counsel for Kliger Partners in support of paragraph 2 of the notice of contention.

111 I should also add that, once it be accepted that Associate Justice Wood did not travel beyond the issues that were before him, the suggestion in Mr Lotzof's written submissions that his Honour made certain specified findings that could stand in Mr Lotzof's way in future with respect to his defences of mistake, undue influence and unconscionable conduct do not require to be further dealt with. Whether or not the findings referred to would have any such consequence, they were findings which, by hypothesis, his Honour was entitled to make in the course of determining the issues that were properly before him.

112 I turn to Mr Lotzof's challenge to his Honour's conclusion on the consideration point itself. This challenge was contained in paragraph 16 of the notice of appeal, as follows:

The Associate Justice erred in holding that [for] a costs agreement to be valid, consideration need not flow directly to the Defendant and that it was sufficient for consideration to flow indirectly to him via his connection with the company.

In paragraph 25 of his written submissions,[110] counsel for Mr Lotzof sought to support ground 16 with a reference to Coulls v Bagot's Executor and Trustee Co Ltd.[111] However, he did not make any oral submissions in support of this ground before me.

113 In any event, I accept the essence of the written submissions of counsel for Kliger Partners relating to this ground. It is fundamental that, although consideration does need to move from the promisee, it need not move to the promisor.[112] Accordingly, as counsel submits, there is no problem with finding Kliger Partners' promise to act for SecurEFT as constituting consideration for Mr Lotzof's promise to pay. There is nothing in Coulls that would support a different result.

114 Accordingly, the holding of Associate Justice Wood that the costs agreement was not unenforceable for want of consideration should not be disturbed. A minor correction to the expression of the relevant part of the order is appropriate, as mentioned above.

Non-compliance with cost disclosure obligations

115 I turn to the part of the appeal that relates to the Associate Judge's determination of what I have called the fourth issue, being the nature, extent and consequences of any failures on the part of Kliger Partners to comply with their costs disclosure obligations under the Legal Profession Act 2004.

116 The relevant provisions of the Legal Profession Act 2004 as in force at the relevant time were:

3.4.2 Definitions

In this Part -

litigious matter means a matter that involves, or is likely to involve, the issue of proceedings in a court or tribunal;

Note

A matter is a litigious matter when proceedings are initiated or at any stage when proceedings are reasonably likely.

3.4.9 Disclosure of costs to clients

(1) A law practice must disclose to a client in accordance with this Division -

(a) the basis on which legal costs will be calculated, including whether a practitioner remuneration order or scale of costs applies to any of the legal costs; and

(b) the client's right to -

(i) negotiate a costs agreement with the law practice; and

(ia) receive a bill from the law practice; and

(ii) request an itemised bill within 30 days after receipt of a lump sum bill; and

(iii) be notified under section 3.4.16 of any substantial change to the matters disclosed under this section; and

(c) an estimate of the total legal costs or, if that is not reasonably practicable -

(i) a range of estimates of the total legal costs; and

(ii) an explanation of the major variables that will affect the calculation of those costs; and

(e) details of the intervals (if any) at which the client will be billed; and

(f) the rate of interest (if any) that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest (as referred to in subsection (1A)); and

(g) if the matter is a litigious matter, an estimate of -

(i) the range of costs that may be recovered if the client is successful in the litigation; and

(ii) the range of costs the client may be ordered to pay if the client is unsuccessful; and

(h) the client's right to progress reports in accordance with section 3.4.18; and

(i) details of the person whom the client may contact to discuss the legal costs; and

(j) the following avenues that are open to the client in the event of a dispute in relation to legal costs -

(i) costs review under Division 7;

(ii) the setting aside of a costs agreement under section 3.4.32;

(iii) making a complaint under Chapter 4; and

(k) any time limits that apply to the taking of any action referred to in paragraph (j); and

(l) that the law of this jurisdiction applies to legal costs in relation to the matter; and

(m) information about the client's right -

(i) to accept under a corresponding law a written offer to enter into an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter; or

(ii) to notify under a corresponding law (and within the time allowed by the corresponding law) the law practice in writing that the client requires the corresponding provisions of the corresponding law to apply to the matter.

The client's right to enter into an agreement or give a notification as mentioned in paragraph (m) will be under provisions of the law of the other jurisdiction that correspond to section 3.4.4.

...

(2) For the purposes of subsection (1)(g), the disclosure must include -

(a) a statement that an order by a court for the payment of costs in favour of the client will not necessarily cover the whole of the client's legal costs; and

(b) if applicable, a statement that disbursements may be payable by the client even if the client enters into a conditional costs agreement.

3.4.11 How and when must disclosure be made to a client?

(1) Disclosure under section 3.4.9 must be made in writing before, or as soon as practicable after, the law practice is retained in the matter.

...

3.4.13 Additional disclosure - settlement of litigious matters

(1) If a law practice negotiates the settlement of a litigious matter on behalf of a client, the law practice must disclose to the client, before the settlement is executed -

(a) a reasonable estimate of the amount of legal costs payable by the client if the matter is settled (including any legal costs of another party that the client is to pay); and

(b) a reasonable estimate of any contributions towards those costs likely to be received from another party.

(2) A law practice retained on behalf of a client by another law practice is not required to make a disclosure to the client under subsection (1) if the other law practice makes the disclosure to the client before the settlement is executed.

(1) Written disclosures to a client under this Division -

(a) must be expressed in clear plain language; and

(b) may be in a language other than English if the client is more familiar with that language.

(2) If the law practice is aware that the client is unable to read, the law practice must arrange for the information required to be given to a client under this Division to be conveyed orally to the client in addition to providing the written disclosure.

A law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under this Division as soon as is reasonably practicable after the law practice becomes aware of that change.

(1) If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been reviewed under Division 7.

Under section 3.4.45, the costs of a review in these circumstances are generally payable by the law practice.

(2) A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been reviewed under Division 7.

(3) If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed and the client or associated third party payer has entered into a costs agreement with the law practice, the client or associated third party payer may also apply under section 3.4.32 for the costs agreement to be set aside.

(4) If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, then, on a review of the relevant legal costs, the amount of the costs may be reduced by an amount considered by the Costs Court to be proportionate to the seriousness of the failure to disclose.

...

(7) Subsections (1) and (2) do not apply if the legal costs are or have been the subject of a civil complaint under Chapter 4.

3.4.18A Disclosure to associated third party payers

(1) If a law practice is required to make a disclosure to a client of the practice under this Division, the practice must, in accordance with subsections (2) and (3), also make the same disclosure to any associated third party payer for the client, but only to the extent that the details or matters disclosed are relevant to the associated third party payer and relate to costs that are payable by the associated third party payer in respect of legal services provided to the client.

(2) A disclosure under subsection (1) must be made in writing -

(a) at the time the disclosure to the client is required under this Division; or

(b) if the law practice only afterwards becomes aware of the legal obligation of the associated third party payer to pay legal costs of the client - as soon as practicable after the practice became aware of the obligation.

(3) Section 3.4.15 applies to a disclosure to an associated third party payer under subsection (1) in the same way as it applies to a client.

(4) An associated third party payer for a client of a law practice has the same right as the client to obtain reports under section 3.4.18(1)(b) of legal costs incurred by the client, but only to the extent that the costs are payable by the associated third party payer in respect of legal services provided to the client, and the law practice must comply with that section accordingly.

117 As mentioned above, Associate Justice Wood determined, pursuant to s 3.4.17(4) of the Act, that the amount of the costs in question (when finally taxed) should be reduced by 5%. In essence, Mr Lotzof complains that the 5% assessment was too low. His relevant grounds of appeal are grounds 18, 19 and 20. They read:

1. The Associate Justice failed to provide reasons for his decision that a discount of 5% of the total costs payable was proportionate to the seriousness of the failures to disclose.
2. The Associate Justice was required to consider that the costs claimed were in the sum of $66,000 when the initial estimate was $5,500-$7,700 in determining the seriousness [of the failure] of the disclosure.
3. The decision of the Associate Justice that a discount of 5% of the costs payable was manifestly unreasonable and amounted to a miscarriage of his discretion.

118 In his principal written submissions,[113] counsel for Mr Lotzof tends to roll these grounds together.

119 Counsel notes that the Associate Justice stated that 'section 3.4.17(4) of the Act allows a reduction in costs considered proportionate to the seriousness of the failure to disclose. It is appropriate that a discount of 5% be applied to the ultimate costs liability'.[114] Counsel submits that the Associate Judge did not provide any other reasons for his decision that a discount of 5% was appropriate. He cites passages from the judgment of Charles, Buchanan and Chernov JJA in Fletcher Construction Australia Limited v Lines MacFarlane & Marshall Pty Ltd (No 2)[115] in which a judgment given in the Trial Division was criticised for an insufficient explanation of an assessment made in a building case that a certain stage of the building work was 93% complete.

120 Counsel's written submission proceeds:[116]

1. The Associate Justice was required to consider the following factors in his decision, but it is impossible to determine if he did so:

(a) The costs claimed were in the sum of $66,000 when the initial estimate provided was in the sum of $5,000 to $7,000 plus GST;

(b) The Plaintiff failed to provide a proper estimate of costs payable for the arbitration until after the settlement of the arbitration (paragraph 64 of the decision) (CB 36);

(c) The Plaintiff failed to disclose the costs payable if the defendant was unsuccessful in the arbitration (paragraphs 48 and 49 of the decision) (CB 32);

(d) The Plaintiff failed to provide updated costs disclosure in relation to the third phase of the retainer in September 2012 (paragraph 59 of the decision) (CB 34);

(e) The Plaintiff failed to provide updated costs disclosure between September and November 2012 (paragraph 60 of the decision) (CB 35);

(f) The Plaintiff failed to provide updated costs disclosure in relation to the projected costs to the end of the arbitration (paragraph 62 of the decision) (CB 35);

(g) The Plaintiff failed to provide accurate costs disclosure at the time of the settlement of the arbitration (paragraph 64) (CB 36).

121 In paragraph 31 of the submissions, counsel turns to ground 3 of the notice of contention that had been filed by Kliger Partners. Ground 3 reads:

The determination that the s. 3.4.17 reduction should be 5% of the costs amenable to taxation in light of the accord and satisfaction found to exist may be supported on the following bases:

(a) the costs agreement governed the Respondent's entitlement to legal costs for work in three matters in which it acted for the Appellant (the mediation, the post-mediation negotiation for a new agreement, and the arbitration);

(b) none of the matters were proven to be, alternatively the arbitration was not proven to be, a s. 3.4.2 'litigious matter' so s. 3.4.9(1)(g) and s. 3.4.13 had no application and were not breached;

(c) it was not proven that the Respondent negotiated the settlement of the arbitration in s. 3.4.13 sense, so s. 3.4.13 had no application and was not breached for that reason as well; and

(d) none of the alleged costs disclosure breaches enlivening s. 3.4.17 were proven to have had any financially detrimental consequences for the Respondent.

122 Counsel for Mr Lotzof contends that the matters in ground 3 of the notice of contention are in the nature of an appeal from various findings of the Associate Judge and that, if they were upheld, they would require that his decision be set aside and that the discretion be re-exercised. Counsel continues:

The Plaintiff was required to provide costs disclosure to the Defendant pursuant to s 3.4.13 of the Legal Profession Act as it was a litigious matter, as an award in an arbitration is enforceable in a court (s 35 of the Commercial Arbitration Act) or alternatively there was an obligation to disclosure [sic] the costs at the time of the settlement pursuant to s 3.4.16 of the Act, that was imposed upon the Plaintiff, as the settlement occurred during its retainer and was the subject of professional charges (that included discussing the offer with the Defendant and reviewing and considering the deed of settlement). The consequences of a failure to disclose is imposed pursuant to s 3.4.17 by reason of a failure to comply with the Act, and there is no need to prove that there were any financial losses incurred by the Defendant.

123 In the written submission in response filed on behalf of Kliger Partners, it was contended that the reduction of 5% represented the exercise of a broadly based discretion which falls to be exercised by the Costs Court in every taxation as between solicitor and own client where there has been anything short of perfect compliance with the initial and ongoing requirements for disclosure; and it is submitted that reasons are not generally given formally in taxations. It is further submitted that the Trial Division should take care to ensure that too great a burden in relation to the giving of reasons is not imposed on those who conduct taxations. Reference is made to Smirnios v Byrne (No 2)[117] in which, according to the submission of Kliger Partners, Lasry J gave no more detailed reasons for the figure of 15% which his Honour chose in that case when re-exercising, on a de novo appeal, the power which the Costs Court had exercised pursuant to s 3.4.17(4). It is further submitted that Lasry J did not criticise the brevity of the reasons which had been given by the Costs Court for the decision which it had made at first instance. Kliger Partners submits that by comparison with the 15% 'penalty' imposed by Lasry J in the 'more serious circumstances of that case', the 5% 'penalty' imposed by Associate Justice Wood does not suggest a too light touch in the instant case. Rather, Kliger Partners submits, it seems reasonable 'particularly given the fact that Mr Lotzof himself conceded he was verbally informed of the higher costs estimate'.

124 In the written submissions, Kliger Partners make some complaint that the findings of non-disclosure made by the Costs Court went beyond those which had been originally alleged by Mr Lotzof. I do not think that Kliger Partners was correct in that regard. In any event, there was no injustice done to Kliger Partners in the way in which the Costs Judge proceeded.

125 In the same written submissions, Kliger Partners also persisted with the submission foreshadowed in the notice of contention that Kliger Partners were engaged to act in relation to three distinguishable 'matters'. That is the submission to which I have referred above in dealing with the second issue. Further, Kliger Partners elaborated on its contention that none of the matters was a 'litigious matter' within the meaning of that expression as defined in s 3.4.2 of the Legal Profession Act 2004 for the purposes of, relevantly, ss 3.4.13 and 3.4.17 of the Act.

126 Finally, in the written submissions, Kliger Partners contended that any defaults were 'de minimis' and were not characterised by bad faith, and that it was therefore inappropriate to 'punish' the firm 'when there was no evidence that Mr Lotzof would have (or could have) done anything differently had the defaults not occurred, and 5% was a generous estimate of any inchoate general prejudice he may have suffered'.

127 As already indicated, a submission in reply dated 6 March 2015 was filed on behalf of Mr Lotzof. So far as presently relevant, Mr Lotzof contends in those submissions that Smirnios v Byrne (No 2) can be distinguished on the basis that, at the time, there was an appeal de novo from the Taxing Master and, for that reason, there was no need for the Taxing Master to provide detailed reasons. Further, according to Mr Lotzof, the failure to provide disclosure in the present case was of a different nature and degree as compared with what was found in Smirnios v Byrne (No 2). He went on to contend that a mediation and an arbitration could be classified as a litigious matter. He noted that, in any event, the Costs Judge had found that there had been a failure to make continuous disclosure within the meaning of s 3.4.16 of the Act. He pointed out that the oral costs estimate for the hearing was in the sum of $60,000 and that this had been exceeded in that the costs actually charged were $66,000 and that that was so notwithstanding that the matter settled prior to the first day of the arbitration.

128 Mr Lotzof also pointed to clear indications that Kliger Partners was involved as the instructing solicitor in relation to the arbitration and that it had imposed charges for such things as discussing the offer to settle and for reading and considering the deed of settlement. I accept that point.

129 At the oral hearing, counsel for Mr Lotzof raised two additional points. He asserted that paragraph 5 of the order that was made on 20 June 2014 omitted to record all of the defaults that had been found by the Associate Judge in his reasons for ruling. Further, counsel pointed out that, had the arbitration proceeded through both the liability and damages phases, the total amount of costs that might have been incurred could have reached $150,000 or perhaps even $200,000, figures which may be contrasted with the oral estimate of $60,000 that had been given in November 2012 and repeated in April 2013.

130 In my opinion, the matters relied upon by Mr Lotzof do not, either individually or collectively, warrant interference with the determination by Associate Justice Wood that a reduction of 5% should be applied.

131 Mr Lotzof needed to establish error on the part of the Associate Judge in order to succeed in this appeal. Moreover, the presently relevant part of the decision under appeal was made in the exercise of a statutory discretion conferred on a specialist court. It was common ground before me that, in those circumstances, the principles referred to in House v The King[118] were applicable. Moreover, s 3.4.17(4) provides that the amount of the costs may be reduced by an amount 'considered by the Costs Court' to be proportionate to the seriousness of the failure to disclose. In my view, a tight rein must be kept on appeals from the Costs Court with respect to the exercise of this power.

132 Fletcher Construction[119] is entirely distinguishable. In that case, the trial judge had been required to arrive at a percentage assessment of the extent of completion of certain building works. That was a factual assessment. It was not an exercise comparable to that which faced the Costs Court in the present case, namely to exercise a discretion as to whether the costs should be reduced by an amount considered by the Costs Court to be proportionate to the seriousness of the failure to disclose.

133 In any event, it is difficult to imagine what more Associate Justice Wood might have done to explain his choice of 5% as the appropriate reduction. Overall, the reasons for ruling were 20 pages long. Of these, five pages containing 21 paragraphs and 13 footnotes were devoted to analysing Mr Lotzof's contentions about costs disclosure and the responses of Kliger Partners. It is not suggested by Mr Lotzof that the Associate Judge omitted to deal with any of the allegations of non-disclosure that had been made. Plainly, his Honour considered that there were certain countervailing circumstances which tended to call for a lower reduction. Although his Honour did not accept (as I do not accept) that there were three separate matters and three separate retainers, nevertheless it is relevant that there were three distinct phases of the one matter. It is also relevant that the bills in question relate only to the third phase. There had been disputes relating to the bills applicable to the first phase and the second phase but, as Associate Justice Wood noted, those bills had been paid and, in one case, a substantial compromise (in the nature of an accord and satisfaction) had been reached.

134 I do not accept that it is 'impossible to determine' whether the Associate Justice considered the factors referred to in paragraphs 28(a) to (g) of Mr Lotzof's principal written submissions. To the contrary, I see no reason to doubt that his Honour took each of those matters (all of which he referred to expressly) into account in reaching his ultimate decision. So far as the selection of the actual percentage figure is concerned, Mr Lotzof has not disputed the submission of Kliger Partners that Lasry J gave no greater detail in this regard in Smirnios v Byrne (No 2). It might be said that there is a broad analogy here with the well-known 'intuitive synthesis' approach which is required to be taken by courts in sentencing in criminal cases. On the other hand, it is not useful to endeavour to obtain a guide as to the appropriate figure by comparing the instant case with a single earlier case such as Smirnios v Byrne (No 2), especially where the facts of the two cases are quite different, which is the situation here.

135 I do agree with Mr Lotzof that the relevant matter was a 'litigious matter' within the meaning of s 3.4.2 of the Legal Profession Act 2004. I would not uphold the notice of contention of Kliger Partners insofar as it raises the contrary contention. However, this does not assist Mr Lotzof to achieve the setting aside of the decision of Associate Justice Wood. His Honour likewise rejected the argument by Kliger Partners that the matter was not a litigious matter.

136 I accept that the oral estimate proved to be very low and should have been updated. However, Associate Justice Wood himself recognised this and, in my view, took it into account.

137 I see no real significance in the fact that some of the instances of non-disclosure may not have been fully reflected in the language of paragraph 5 of the order made on 20 June 2014. Given the circumstances in which that order came to be framed, its terms do not indicate to me that, when his Honour was considering and arriving at the appropriate percentage reduction on 12 May 2014, his Honour had forgotten or overlooked any of the relevant instances of non-disclosure, the same having been carefully recorded in the reasons for ruling published on that day. I note that no application was made to amend the notice of appeal on this account.

138 For these reasons, I would not disturb the determination of the Costs Judge that the amount of the relevant costs be reduced by 5%.

139 In my opinion, the appeal should be dismissed, subject only to the minor clarification required to paragraph 3 of the order made on 20 June 2014.

140 Hence I propose to make an order in the following terms:

(1) Paragraph 3 of the order made by the Costs Court constituted by the Costs Judge on 20 June 2014 be amended by adding, after the expression 'in the sense that it was not void ab initio' the words 'for want of consideration'.

141 I will hear the parties on the question of the costs of the appeal.

[1] The Company was SecurEFT Pty Ltd. See below.

[2] Transcript of proceedings, Kliger Partners v Lotzof (Supreme Court of Victoria, S CI 2013 06659, Cavanough J, 15 April 2015) ('Transcript') page 4.

[3] See Mr Lotzof's outline of submission in the Costs Court dated 23 April 2014; CB 10-15. In addition, there is an indication on the Costs Court file, in paragraphs 19-21 of an affidavit of Emily Marson affirmed 10 February 2014 and filed on behalf of Kliger Partners, that Mr Lotzof had also contended, and that Kliger Partners may have accepted, that the bills of costs were not prepared in accordance with Rule 63.42 of the Supreme Court (General Civil Procedure) Rules 2005. However, the parties made no further reference to any such point before the Costs Court or before this Court on appeal.

[4] It has not been suggested that Mr Lotzof was not free to take that stance. See, generally, Dal Pont, Law of Costs (3rd ed) [5.43]-[5.44].

[5] Burns Philp and Co Ltd v Bhagat [1993] VicRp 13; [1993] VR 203, 208; Jacobson v Ross [1995] VicRp 24; [1995] 1 VR 337, 339 (Brooking J). See 'Partial Outline of Submissions: Costs and Orders' dated 20 June 2014 prepared by counsel for Kliger Partners and retained on the file.

[6] It appears that Associate Justice Wood incorrectly recorded in his Reasons for Rulings that the hearing had been held on 23 April 2014.

[7] 'Partial Outline of Submissions: Costs and Orders' dated 20 June 2014, [4]-[7].

[10] Paragraph [3]: CB 17. See also the acknowledgement by counsel for Mr Lotzof before the Costs Court in the Transcript of Proceedings, Kliger Partners v Lotzof (Costs Court of the Supreme Court of Victoria, S CI 2013 06659, Wood AsJ, 24 April 2014) ('Transcript of hearing before the Costs Court') page 8: CB 507.

[11] See Wang v New South Wales (2011) NSWCA 321 [23].

[12] See also Part 1 (entitled 'What was before the Costs Judge') of Kliger Partners' Outline of Submissions dated 24 October 2014: CB 636-637.

[14] As noted above, the order of the judicial registrar made on 11 February 2014 in the Costs Court seems to have been treated as being, by implication, an order under Rule 47.04.

[15] Jacobson v Ross [1995] VicRp 24; [1995] 1 VR 337, 339 (Brooking J); Rainsford v Victoria [2005] FCAFC 163; (2005) 144 FCR 279, [26] (Kenny J, with whom Hill and Finn JJ agreed). See also Vale v Daumeke [2015] VSC 342 [31] (Derham AsJ).

[17] Despite the repeal of the Legal Profession Act 2004, as from 1 July 2015, by the Legal Profession Uniform Law Application Act 2014, s 3.4.47 of the 2004 Act and the other relevant provisions of that Act remain applicable for the purposes of this proceeding by virtue of relevant transitional provisions.

[19] Cf Moorabbin Transit Pty Ltd v Bekhit [2016] VSCA 70.

[20] Meaning, essentially, what was formerly called 'solicitor-client taxation'.

[21] Meaning a person who, though not the client, has paid or is under a legal obligation to pay all or part of the costs for legal services provided to the client: see s 3.4.2A of the Legal Profession Act 2004. A third party payer does not include a person who is required by an order made in contentious proceedings to indemnify an adversary for legal costs incurred in the proceedings.

[23] See generally AJH Lawyers v Mathieson Nominees Pty Ltd [2015] VSCA 227.

[24] [2012] VSC 519 ('Gadens'), [13]-[14]. This point was not raised on appeal: Beba Enterprises Pty Ltd v Gadens Lawyers [2013] VSCA 136.

[25] As of 1 January 2013, upon the commencement of s 4 of the Supreme Court (Associate Judges Appeals Amendment) Rules 2012, Rule 77.06 was revoked and replaced by Rules 77.06 to 77.06.9.

[26] [2015] VSC 37.

[27] The corresponding view taken by McDonald J in AJH Lawyers v Mathieson Nominees Pty Ltd [2015] VSC 37 (at [29] and [118]) was not the subject of any challenge, or any discussion, in the appeal to the Court of Appeal: see AJH Lawyers v Mathieson Nominees Pty Ltd [2015] VSCA 227. See also GLS v Goodman Group Pty Ltd [2015] VSC 627, [4]; Williams' Civil Procedure Victoria [269G.5].

[28] Dwyer v Calco Timbers Pty Ltd [2008] HCA 13; (2008) 234 CLR 124 [2].

[29] AJH Lawyers v Mathieson Nominees Pty Ltd [2015] VSC 37 [48]; affirmed [2015] VSCA 227 [82].

[30] Transcript of hearing before the Costs Court pages 19-20: CB 518-519.

[31] Ibid page 20: CB 519.

[32] Ibid page 20-21: CB 519-520.

[35] Counsel's submission thus encompassed paragraphs 1 and 2 of the affidavit as well as paragraphs 3-12.

[37] Affidavit of Anton Benjamin Block affirmed 25 March 2014 ('Block affidavit') [3]: CB 284.

[38] As to this date, see the letter from Minter Ellison dated 12 September 2012: CB 404. However, another document in the Court Book suggests that the contract may have come into operation in October 2010: see the Points of Agreement document dated 9 August 2012 at CB 319.

[41] Letter from Minter Ellison to the Institute of Arbitrators and Mediators Australia - Victorian Chapter dated 12 September 2012: CB 404-405.

[43] Referred to in the letter dated 12 September 2012 from Minter Ellison to the Institute of Arbitrators and Mediators Australia - Victorian Chapter: see CB 404-405.

[48] Block affidavit [14]-[17]: CB 287-288; Evidence of Mr Lotzof, transcript of hearing before the Costs Court, page 57, lines 19-24: CB 556; Reasons of Costs Court dated 12 May 2014 ('Reasons') [6]-[7], [34]: CB 18, 25.

[49] Transcript of hearing before the Costs Court at page 47: CB 546.

[51] Transcript of hearing before the Costs Court pages 53-56: CB 552-555.

[52] Transcript of hearing before the Costs Court at pages 47-58 (CB 546-557), esp at page 57, lines 20-24: CB 556; Reasons, [36]-[38]: CB 26-28.

[53] Transcript of hearing before the Costs Court pages 51-52: CB 550-551.

[54] Transcript of hearing before the Costs Court page 66: CB 565.

[55] It is clear enough that counsel was here contending that the telephone conversation amounted to oral acceptance (by the second method) by SecurEFT, at least.

[58] At paragraphs 14, 16(d), 37 and 38.

[59] Dated 6 March 2015, filed 10 March 2015.

[60] See definition of 'client' in s 1.2.1 of the Legal Profession Act 2004.

[61] See, eg, transcript before the Costs Court, page 11, lines 5-16 (CB 510); pages 25-26 (CB 524-525); page 33 (CB 532).

[62] Clause 16 is set out in full above.

[63] Cf Comlaw (No 62) Pty Ltd v Owens [2003] VSC 35; and see Parker v South Eastern Railway Co (1877) 2 CPD 416, 421-5; Toll v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 180 [42]; S_urfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd_ [2015] QSC 290 [41] (Peter Lyons J).

[64] See especially paragraphs 17 and 21 of his Honour's Reasons for Ruling: CB 21-24 para 21 and 23-24.

[65] Outline dated 24 October 2014, paragraph 20: CB 640.

[66] Seddon & Ellinghaus, Cheshire & Fifoot's Law of Contract (9th Australian ed, 2008) 115 [3.22].

[67] See Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, 163-164 [25]-[26]; Kriketos v Livschitz [2009] NSWCA 96 [109]; Arbolino v Williams [2010] NSWSC 1111 [22]; Civil & Allied Technical Construction Pty Ltd v A1 Quality Concrete Tanks Pty Ltd [2015] VSCA 75 [55]; Seddon & Ellinghaus, Cheshire and Fifoot's Law of Contract (9th Australian ed, 2008) [3.9] fn 69.

[68] Again, see especially paragraphs 17 and 21 of his Honour's Reasons for Ruling: CB 21-24 para 21 and 23-24.

[69] (1988) 14 NSWLR 523 ('Empirnall').

[71] Especially Arnott v Glissan [2013] NSWCA 316 [34] (Emmett JA); Swaab v Sayed [2013] NSWSC 887 [28] (Kunc J); and Albarouki v Prime Lawyers Pty Ltd (2013) DCLR (NSW) 385, [58].

[72] Transcript before the Costs Court page 11, lines 5-16 (CB 510); pages 25-26 (CB 524-525); page 33 (CB 532).

[73] Again, see especially paragraphs 17 and 21 of the Reasons for Rulings.

[74] Letter dated 11 July 2012: CB 96.

[75] Disclosure Statement - Litigious Matters, cl 2.1: CB 101.

[76] Transcript before the Costs Court pages 25-26 (CB 510); page 33 (CB 532).

[77] Modern Buildings Wales Ltd v Limmer & Trinidad Co Limited [1975] 1 WLR 1281, 1289; Coopers Brewery Ltd v Lion Nathan Australia Pty Ltd [2005] SASC 400; (2005) 93 SASR 179 [26]-[29]; Shop Distributive and Allied Employees' Association v Woolworths Ltd [2006] FCA 616; (2006) 151 FCR 513 [26]-[30]; Lewison & Hughes, The Interpretation of Contracts in Australia (2012) [3.09].

[79] Clause 16 of the offer to enter into the costs agreement, first sentence. For similar conclusions in comparable cases, see Swaab v Sayed [2013] NSWSC 887, [26]-[27] (Kunc J); Albarouki v Prime Lawyers Pty Ltd [2013] DCLR (NSW) 385, [56]-[60].

[80] Relying on Morris Blackburn v Burmingham [2009] VSC 20 [116]-[117] (Byrne J); Cf Equuscorp Pty Ltd v Wilmoth Field Warne (No 3) [2004] VSC 164 [10]-[11].

[81] Reasons for Ruling [28] (footnote omitted).

[82] For a recent statement by the High Court of the relevant principles, see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 [46]-[52].

[83] [2000] WASC 188 [42]-[48] (Hasluck J).

[85] Block affidavit [13]-[28] (CB 286-290), esp at [13], [18] and [19].

[86] Outline of submissions dated 26 September 2014: CB 627-629.

[87] Paragraphs 7(a)-(c) of the affidavit of 18 November 2013 do not clarify whether, before Kliger Partners set out the offer to enter into the costs agreement, Mr Block expressed to Mr Loztof his confidence about the likely success of the proposed mediation. Incidentally, it would only be fair to take those paragraphs into account if they were read together with a certain affidavit to which they were responding, namely an affidavit of Mr Lotzof himself dated 22 October 2013 (affirmed 28 October 2013) which was filed in the proceeding in the Magistrates' Court. In paragraph 8 of that affidavit, Mr Lotzof said that he initially consulted Kliger Partners (on behalf of SecurEFT) 'in relation to the dispute being referred to mediation and to commercial arbitration as required by the agreement': CB 90. That statement, made by Mr Lotzof himself, could have been quite telling against him on the present point, but it seems from the 'Guide to the Appeal Books' that this particular affidavit of Mr Lotzof did not form part of the material before the Costs Court except to the extent that it authenticated certain documents, and that Kliger Partners do not rely upon it except as it authenticates those documents. Therefore, in favour of Mr Lotzof, I have paid no regard to what he said in that affidavit as to the subject matter upon which he consulted Mr Block at their initial meeting.

[88] Written outline of submissions dated 26 September 2014 [18]: CB 628.

[89] Transcript before the Costs Court pages 82-87.

[90] See paragraph [15] of Mr Lotzof's written reply at CB 652, which responded to paragraph [49] of Kliger Partners' written submission dated 24 October 2014 at CB 645.

[91] [2010] NSWSC 132 [57] (Austin J).

[92] Outline of submission to the Costs Court on behalf of Mr Lotzof dated 23 April 2014, paragraph [26]: CB 14.

[95] FAI Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] VicRp 76; (1993) 2 VR 343, 351 (Brooking J); O'Neill v Vero Insurance Ltd [2008] VSC 364 [10] (Beach J).

[96] Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896, 912 (Lord Hoffman); approved by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Lewison & Hughes, The Interpretation of Contracts (2012) [2.01].

[97] Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 [35]; Lewison & Hughes, The Interpretation of Contracts (2012) [3.15].

[98] It does appear that Appendix A was in standard form and was not fashioned specifically for the purposes of this costs agreement. However, items 5 and 6 of the Reference Schedule also seemed to anticipate litigation in a court or tribunal and they were not entirely in standard form.

[99] Harrison v Hocking (2000) WASC 188 [42]-[48] (Hasluck J).

[105] Transcript of hearing before the Costs Court page 5, lines 11-21: CB 504.

[107] 'Partial outline of submissions: Costs and orders' prepared by counsel for Kliger Partners dated 20 June 2014 [9].

[108] Ibid, loc. cit. See also transcript of hearing before the Costs Court, page 5 and paragraph [2] of Kliger Partners' notice of contention dated 13 June 2014 (set out above).

[109] Transcript of hearing before the Costs Court page 5, lines 11 to 21: CB 504.

[111] [1967] HCA 3; (1966-1967) 119 CLR 460 ('Coulls').

[112] Pico Holdings Inc v Wave Vistas Pty Ltd (formerly Turf Club Australia Pty Ltd) [2005] HCA 13; (2005) 214 ALR 392, 407 [66]; Carter, Peden & Tolhurst, Contract Law in Australia (5th ed, 2005) [6-22].

[113] Dated 26 September 2014 at paragraphs 27 and 28 and see also at paragraph 31: CB 632-635.

[114] Reasons for Ruling, paragraph 66: CB 36.

[115] [2002] VSCA 189; (2002) 6 VR 1 at 26.

[117] [2009] VSC 86 (Lasry J).

[118] [1936] HCA 40; (1936) 55 CLR 499.

[119] [2002] VSCA 189; (2002) 6 VR 1.