//
[2020] VSC 112
General information, not legal advice.
Supreme Court of Victoria
2020-03-20
Gourlay JR
Original judgment source is linked above.
9. The costs be costs in the taxation.
10. Liberty to apply.
9 At the hearing the respondent relied on her affidavits sworn on 16 September 2019 and 21 October 2019, an affidavit of Catherine Mary Dealehr sworn on 21 October 2019 and an extensive, 18 page, submission filed on 22 October 2019. In addition, the respondent served a Notice to Produce on the applicant and called for a number of documents to be produced from the applicant's file.
10 The applicant relied on its costs disclosure statement and costs agreement dated 28 April 2017, affidavits of Jim Palmos sworn on 7 October 2019 and 10 October 2019, and a written submission filed on 7 October 2019.
11 The 7 August 2019 order has added Terry Casey QC and Dugald McWilliams of counsel as parties to the proceeding. Neither counsel chose to appear at the hearing. Section 198(9) of the LPUL states that they may be bound by the assessment if the costs assessor determines that to be the case.
12 It was common ground between the parties that a solicitor-client bill of costs includes items that are claimed in the party-party bill of costs in addition to solicitor-client items of costs. The party-party bill is 208 pages including 1390 items. The solicitor-client bill is 213 pages with 1491 items. Both bills claim a loading on professional costs for care, skill and attention[6] of 15%. The solicitor-client bill claims an uplift fee of 25% on professional charges as provided for in the cost agreement. The solicitor-client bill also adds GST at 10% of charges. I have not undertaken a detailed examination of both bills however it is apparent that the added or amended solicitor-client items are not easily identified by underlining or the like.
Preliminary Issue (a) - Does the applicant have standing to review the costs of the former solicitors that are claimed in the bill at items 1- 21 and 22 - 419?
13 The applicant, in both its written submission and at the hearing, stated that it does not seek a review of the items in the bill that claim the costs of Galbally & O'Bryan (items 1‑21) and KCI (items 22 - 419). The Summons for Taxation applies to review of the costs which are payable to the Applicant by the Respondent, being items 420 to 1491. Nevertheless, despite the timely concession by the applicant, the respondent's solicitor addressed this issue at some length. In my view, in light of the concession, the only order required, for the purpose of the review, is that items 1-419 are not the subject of the review and are not to be treated as 'taxed off' for the purposes of section 204(2)(c). At a later time when it comes to settling the cash account those items may be pertinent as the applicant holds monies in its trust account that may be payable to either Galbally & O'Bryan and KCI.
Preliminary Issue (b) - Was there an initial fixed cost agreement and are all of items 420 - 504 incurred pursuant to that agreement? If so are those items able to be reviewed?
14 The respondent submitted that the parties entered into a fixed costs agreement on 15 March 2017. This agreement concluded on 20 April 2017 and all of the work in items 420 - 504 of the bill was undertaken pursuant to that agreement. The respondent initially conferred with Jim Palmos of the applicant firm requesting the firm act on her behalf on 13 February 2017. He declined to act and suggested she consult a different law firm. She made further contact on 20 February 2017, 1 March 2017 and on 8 March 2017.[7] On 8 March 2017 she attended the office with a large number of folders contained in a black shopping trolley. At that time the proceeding had been listed for trial on 16 October 2017 with a trial estimate of 10-12 days[8]. Following that meeting Mr Palmos agreed to retain counsel to advise him on the likely prospects of the proceeding succeeding. It was likely that if counsel's advice had been of the view that the action would fail the applicant would not have agreed to act. A letter dated 15 March 2017 [9] provided by the applicant detailed the respondent's instructions and the offer to obtain the initial advice as follows:
Your WorkCover Common Law Damages Claim
We refer to your appointment with our Jim Palmos on 8 March 2017 in which we discussed with you what we propose to do before we agree to take over the conduct of your damages claim which is fixed for trial in the Supreme Court of Victoria at Melbourne before a Judge and Jury of 6 persons commencing on 16 October 2017.
Specifically, we confirm your instructions for us to deliver a Brief to Mr Romesh Kumar of Counsel for advice as to:
We expect that Mr Kumar will probably also wish to confer with you in person and we shall advise you of the conference details as soon as Mr Kumar has provided to us a proposed conference date and time.
Legal Costs
We advise we shall charge you the sum of $3,000.00 plus GST to collate your documents and deliver the brief to Mr Kumar. You will also be responsible for payment of Mr Kumar's advice and conference fee. [10]
We advise that if Mr Kumar is of the opinion that you have reasonable prospects of success, we will extend to you the firm's "No Win,-No Pay" fee arrangement and shall forward to you our firm's Disclosure Statement & Conditional Costs Agreement - as required by Part 4.3 of the Legal Profession Uniform Law (Victoria) - for you to sign, date and return to our office.
Once we receive your signed Disclosure Statement & Conditional Costs Agreement we shall also file and serve a Notice of Change of Practitioner confirming we are your new solicitors on the record.
We advise that our legal costs will be calculated on the Supreme Court Scale of Costs plus an uplift in professional fees only of 25%, as allowed by the Uniform Law. Disbursements (such as barrister's fees, medical report fees, expert report fees, subpoena issuing fees, daily court trial fees, witness attendance fees etc.) will, however, be payable by you irrespective of the outcome of your matter.
....preparing, collating and delivering a Brief to Mr Romesh Kumar of Counsel (4 volumes) including arranging Conference with Mr Kumar on 23 March 2017, exercising all skill, care and attention throughout
16 The letter with the invoice describes the matter as Your Claim for Damages, Supreme Court Proceeding No S CI 2014 04367 and states:
We refer to the above matter and enclose our Tax Invoice in the sum of $5,115, for payment by you, together with attached Notice of Right. We also enclose a copy of Mr Romesh Kumar's fee slip in the sum of $1,815.
Please note that upon the successful completion of your matter, you will be entitled to recover a portion of the sum of $5115 on a party/party basis from the Defendant/s.
We otherwise advise that we will shortly forward to you under separate cover our firm's Disclosure Statement & Conditional Costs Agreement[13] confirming we are prepared to take over the conduct of your matter on a "No Win,-No Pay basis, as required under the Legal Profession Uniform Law (Victoria).
You will need to sign and date the document and return it to our office as soon as possible and prior to the Directions Hearing listed in your matter next Friday, 28 April 2017 at 9.30am.
17 The conditional costs agreement was signed by Mr Palmos on 20 April 2017 and given to the respondent for her consideration, signing and return. The respondent signed, dated and returned the costs agreement on 28 April 2017. Both the 21 April 2017 invoice and the second costs agreement describe the matter using the names of parties and the Supreme Court proceeding number.
18 The respondent submitted that the whole of the work undertaken in the period from 8 March 2017 to 20 April 2017 was included in the fixed fee retainer and unable to be reviewed. The respondent relied on the following:
(a) The 21 April 2017 invoice was a final invoice rendered at the conclusion of the retainer for the fixed fee arrangement and is not an invoice for part of the whole of the work undertaken by the applicant. That is it was not an interim bill that could be reviewed at the time of the final bill.
(b) The whole of the work undertaken between 8 March 2017 and 20 April 2017 was work pursuant to the fixed fee agreement as no other agreement was made to charge for work in that period.
(c) The applicant is out of time to review the invoice as it was rendered on 21 April 2017. Sections 198(3) and(4) do not allow a law practice to apply for leave to review a bill outside the 12 month period. The bill is a final bill for all work undertaken from 8 March 2017 to 20 April 2017.
(d) At no time did the respondent instruct the applicant to undertake work outside the retainer. Instructions to undertake further work were not given until after receipt of counsel's advice that the proceeding had good prospects of success. Therefore all work undertaken in the period was included in the fixed fee agreement and cannot be reviewed.
(e) The costs charged pursuant to the second costs agreement are charged on a different basis to the fixed fee agreement.
(f) The second costs agreement does not provide an earlier starting date or include a term that work undertaken by the applicant firm before the date of acceptance was included in that agreement. So work cannot be charged other than pursuant to the fixed fee agreement, until the date the second costs agreement was signed and returned by the respondent, which was 28 April 2017.
19 In support of these submissions the respondent relied on the decision of Marriner v Meerkin & Apel[14] to argue that the first retainer for all the work undertaken during the period and was limited to work to allow the applicant to decide to act on the respondent's behalf and to offer a conditional costs agreement. Referring to Marriner the respondent's solicitor submitted that:
I use that case to identify that one needs to look at the circumstances surrounding the matter to decide what it is, and we would say the circumstances in this case was, the purpose of the first retainer was only and only whether this law firm would act. [15]
There was - it wasn't that that was the reason why the law firm engaged counsel, it was for the purposes of deciding whether they thought there was a reasonable case for them to decide to offer her a no win, no fee arrangement, and to no doubt assess this client as a witness and a person, whether in fact they wanted to engage. They relied on counsel's view, and as a result of that view, they then said, well, we will now act for you. Before that, they weren't acting, and if they weren't acting, how can they go backwards and now asked to be paid for fees, when in fact they weren't acting?[16]
21 The respondent argued that the 20 April 2017 invoice was a final invoice for all work in the period of the first retainer. The respondent has paid for this work on receipt of the bill. Any other work undertaken from 8 March 2017 to 20 April 2017 was included in the 20 April 2017 bill and, as it was outside the 12 month period, sections 198(3) and (4) prevents the applicant from reviewing that bill.
22 In response, the applicant agrees that it cannot review any work included in the 20 April 2017 bill and does not seek to do so. However, the applicant submits that the first retainer was limited to preparing, collating and delivering the brief to counsel and receiving counsel's advice on the prospects of success of the respondent's proceeding ('the first retainer'). Any other work undertaken by the applicant from 8 March 2017 to 20 April 2017 that advanced the respondent's proceeding and was outside the scope of the first retainer is able to be billed, on a fair and reasonable basis. That basis is the Supreme Court scale of costs. This work does not attract an uplift fee as provided for by the second costs agreement[17] and was not undertaken on a conditional basis. The applicant submits that had the advice not supported the applicant taking on the matter the additional work would have been written off as unrecoverable. However, as the work was done in the initial period and allowed the applicant to commence work as soon as the advice was received it was billable and was for the respondent's benefit.
23 The costs agreements and correspondence described the matter as either the respondent's common law damages claim or Supreme Court Proceeding No S CI 2014 04367. There is a clear nexus between the legal services provided pursuant to the first and second costs agreements. Each costs agreement is an agreement relating to the basis for charging costs. The first agreement fixes the charges to undertake a limited task. Whereas the second agreement provides that the payment of costs is conditional on a 'successful outcome' in the proceeding. The work undertaken in each period is causally connected as arising from prosecuting the respondent's common law proceeding.
24 In respect of the respondent's submissions that any work undertaken in the period from 8 March 2017 to 20 April 2017 is included in the first costs agreement, it is clear that work undertaken was for the proceeding. The advice sought from counsel was far wider than simply an advice on whether the proceeding would succeed. Counsel was also briefed to advise on the likely amount of damages, the state of evidence at that time and whether further evidence was required to be gathered. The memorandum to counsel was 10 page and there were 4 volumes of documents[18].
25 The 15 March 2017 letter advised the respondent that some part of the work was recoverable on a party-party basis[19]. An advice on the prospects of success was to satisfy the applicant that the matter was likely to be successful and was a matter that the applicant was able to undertake. Such an advice is a solicitor client cost. The additional advice was at least in part recoverable on a party-party basis. The brief to advise was prepared, documents collated and delivered to counsel on 17 March 2017. There are claims for additional work after that date which was not limited to the fixed fee agreement work. In my opinion the fixed fee agreement was limited to preparing, collation of documents and deliver the brief only and other work is claimable separately. Counsel was briefed to give advice on the possible amount of damages to be awarded and whether further evidence was required to prepare the matter for trial commencing in October 2017.
26 Items included in the bill between 17 March 2017 and 20 April 2017 claim attending the respondent and counsel, as well as perusal of the previous solicitor's files which had been delivered to the applicant's office by the respondent .[20] I estimate that the sum claimed for these perusals is around $27,000.[21] The respondent submits that any work undertaken perusing the files is included in the fixed fee agreement. The Supreme Court scale of costs recognises that the tasks of examining, collation and perusal are separate tasks and allows different charges for each. In my view the claims in the bill for perusals and other work that is not directly connected with the collation of documents and preparation and delivery of the brief and receiving the advice are not included in the fixed fee agreement and are claimable separately. Any objections as to the timing of the conduct of these perusals and the sums charged for this work will be a matter for the taxation of the bill of costs.
27 The applicant states that it does not seek a review of the costs of the limited retainer. These costs have been billed and paid for. The costs to be reviewed are the additional work undertaken from 8 March 2017 to 20 April 2017 that is outside the scope of the limited retainer. These costs should be allowed on a 'fair and reasonable' basis and are claimed on the Supreme Court scale. The review is also of all the work undertaken from the signing of the conditional costs agreement which are claimed on the Supreme Court scale together with an uplift of 25%.
28 In my view the work outside the limited agreement are identifiable in the bill of costs and will be a matter for the costs review. Any items identified as included in the fixed fee retainer that total more than $3,000.00 will be disallowed as exceeding the amount agreed contrary to that agreement. After completing the costs review a cash account will be settled. This will identify the amounts paid by the respondent for disbursements and will prevent the applicant 'double dipping' in respect of the fixed fee work. To settle the cash account it will be necessary to identify payments made by the respondent to the former law firms to enable any refunds, if appropriate, to her.
Preliminary Issue (c) - Did the applicant fail to comply with section 175(1) in respect of any cost disclosure obligations in respect of the retaining of counsel engaged in the matter?
And Preliminary Issue (d) - Did the applicant breach its disclosure obligations under section 174(1)(b) by failing to update legal costs disclosures when counsel increased hourly rates?
29 The respondent submits that the applicant failed to comply with its main costs disclosure obligation in section 174(1)(a) as it failed to disclose the basis of which counsel's legal costs will be charged and give an estimate of counsel's total legal costs as required by section 175(1).
30 The first reference to the engagement of counsel is at Item 434 for the bill of costs which refers to Solicitor's attendance on Senior Counsel Mr Terry Casey QC seeking to arrange a conference with Senior Counsel on 10 March 2017. The file note produced at the hearing in respect of this items reads Happy to be involved (indecipherable words). I will keep him posted. The respondent submitted that this was the retention of Senior Counsel and that costs disclosure should have followed this attendance.
31 On 28 April 2017 the applicant wrote to the respondent advising of the orders made by Judicial Registrar Clayton at a Directions Hearing held on the day it commenced to act for the respondent.[22] The orders made that day confirm the trial date of 17 October 2017 with an estimate of 10 days. That letter also advised that Mr Casey QC and Mr Kumar have been retained as counsel for the trial. Around 14 June 2017 the respondent requested that the applicant retain a more senior junior barrister than Mr Kumar and, in response, the applicant retained Mr Griffin of counsel. The trial briefs were not prepared and delivered until about 24 August 2017. Shortly before the briefs were to be delivered Mr Griffin advised that he was unavailable and Mr McWilliams was retained on 28 August 2017.[23] The briefs were not marked with specific agreed fees and the counsel retained did not give the applicant costs disclosures or a costs agreement at the time of delivery of the briefs. The briefs delivered have a notation that counsel is retained on a 'No Win - No Fee' basis. The respondent's counsel expressed surprised at this basis of the retainer.[24] In fact this basis of retention is more favourable to the respondent than pursuant to the second costs agreement which required her to pay all disbursements whether her proceeding was successful or not. If the conditional retainer of counsel had not occurred and the proceeding had been unsuccessful the respondent would still have been required to pay all disbursements including counsel's fees.
32 The respondent submits that the applicant has failed to comply with section 175 of the LPUL. That section states:
175 Disclosure obligations if another law practice is to be retained
(1) If a law practice (the first law practice) intends to retain another law practice (the second law practice) on behalf of a client, the first law practice must disclose to the client the details specified in section 174(1) in relation to the second law practice, in addition to any information required to be disclosed to the client under section 174.
(2) If a law practice (the first law practice) retains or intends to retain another law practice (the second law practice) on behalf of a client, the second law practice is not required to make a disclosure to the client under section 174, but must disclose to the first law practice the information necessary for the first law practice to comply with subsection (1).
(3) This section does not apply if the first law practice ceases to act for the client in the matter when the second law practice is retained.
33 The respondent submits that the disclosure of counsel's fees is additional to the disclosure requirements of section 174(1) as section 175(1) states that disclosure is in addition to any information required to be disclosed to the client under section 174.
34 The respondent, in her first affidavit ,swears that on 8 March 2017 Mr Palmos advised her in conference that the range of fees to expect for counsel being $6,000 - $8,000 for senior counsel and $3,000 - $4,000 for junior counsel.[25] In response to this statement Mr Palmos notes that these remarks are not included in his file note of the conference. He does however concede that he may have said those words.[26] The applicant's costs agreement and costs disclosure document was given to the applicant on 20 April 2017 and signed by her on 28 April 2017. It provides that the basis of charge was calculated on the Supreme Court scale of costs with a 25% uplift. The required estimate of total legal costs was made in the following form:
Our estimated total legal costs - section 174(1)(a)
Under Section 174(1)(a) of the Uniform Law we are required to provide to you a single figure estimate of total legal costs to be charged in your matter.
This is very difficult because as you can appreciate there are many variables which affect total legal costs to be charged in any particular matter.
Notwithstanding the above, we estimate total legal costs in your matter (inclusive of GST) as follows:
Supreme Court Damages Claim
(resolution by agreement without fully contested damages trial)
Case No. SCI 2014 04367
Supreme Court Damages Claim
(resolution after fully contested damages trial)
Case No. SCI 2014 04367
Less estimated contribution by defendant/s on a party/party basis
This estimate of total legal costs is NOT BINDING on us, as the work required may change, but is our best advice at this point in time. The estimate is based on our current understanding of the present circumstances of this matter. If the scope of this matter or your instructions to us change in a way that results in a significant change to anything we have previously disclosed, including this estimate, we will revise the estimate as soon as practicable.
35 On 21 September 2017, after the briefs had been delivered to counsel, junior counsel rendered a fee-slip for work. On receipt of the fee-slip Mr Palmos rang Mr McWilliams to discuss the fee slip and Mr McWilliams advised him of both Mr Casey's and Mr McWilliams' intended charges.[27] The next day the applicant wrote to the respondent [28] advising that the daily fees of counsel for the trial were that Mr Casey would charge $11,000 per day and Mr McWilliams would charge $5,500 per day. The letter advises that if she is successful in her damages claim the court was likely to certify counsels' fees at daily fees of $8,800 for Mr Casey and $4,400 for Mr McWilliams. This letter included updated disclosure of total legal costs. The initial estimate of total legal costs was updated in writing the next day as follows:
Supreme Court Damages Claim
(resolution by agreement without fully contested damages trial)
Case No. SCI 2014 04367
Supreme Court Damages Claim
(resolution after fully contested damages trial)
Case No. SCI 2014 04367
Less estimated contribution by defendant/s on a party/party basis
36 The respondent submitted that the applicant breached its costs disclosure obligations as the solicitors did not advise the client of the basis of charge [29] of counsel on or about 10 March 2017 when Mr Palmos first spoke to Mr Casey about his availability to appear at the trial listed for October 2017. The respondent submitted that:
having known from 28 April when they sent the cost agreement to the client and told her that Terry Casey but with Mr Kumar was engaged, that they - that was the point in time that they ought to have engaged and sought clarification under the provisions of a second law practice, provisions 171.1 (sic) that if they intend to retain that law practice, then they must disclose to the client details specified in 174 in relation to that practice, and that is total legal costs and also the basis for charging. [30]
The retainer commences, we say, from 20 April 2017 when the solicitors said that they would act. We have said that's the period that is covered by the conditional cost agreement.
171.1 (sic) is an additional disclosure requirement. There is no evidence that this solicitor complied with this in any way but the ongoing disclosure in September 2017 doesn't give you total legal costs and it wasn't provided at the salient point in time.[31]
38 Mrs Dealehr referred to Farrar v Julian-Armitage & Anor[32] and in particular to Justice Morrison JA who, in considering section 309(1) and (2),[33] stated at paragraph [26] that:
the more conventional scenario, the solicitor must make additional disclosure to the client .......... as it relates to the barrister's costs. In contrast the barrister need not make disclosure under s 308 but must disclose to the solicitor the information necessary for the solicitor to make the additional disclosure.
We would say that the solicitor failed under s.175(1) to do its part of the disclosure requirements and that is to ascertain those costs. We would also say in relation to Terry Casey QC and to Mr McWilliams that they failed, when they were retained - with Mr McWilliams it was not until August - but Mr Casey, you may even say it doesn't occur until August, giving my friend the benefit of the doubt, that's when they received the brief, but that's 23 August that they should have intended to retain another law practice that the law practice, as in the barristers, under 175(2), also needed to make the disclosure to allow the disclosures to be made.
It's like one must do - both of them must do it and what has happened is that sometimes, and quite regularly, barristers don't do what they're required to do. That doesn't save the solicitor from not nagging, not taking responsibility of their job of acting on behalf of the client to ensure that they're totally on top of what is their estimate and the total legal costs that they don't force an inquiry and force that to happen before they retain. [34]
40 And later the respondent's solicitor submitted that:
There's a failure by the solicitor and clearly a failure by the barristers and both are now affected by that in that failure to disclose leads to a consequence under the provisions of the Uniform Law that a failure to - a critical failure - failure to disclose means that they are not entitled to rely on their cost agreement which leads to a consequence that they are entitled to fair and reasonable, taking into account the provisions of 172 and 200 of the Legal Profession Act.[35]
(a) The costs agreement and costs disclosure includes an estimate of total legal costs. The costs disclosure also explains that there may be a shortfall between any recovered counsel's fees and the total amount charged by counsel and all costs overall.
(b) The costs disclosures were updated on 22 September 2017 one day after Mr McWilliams advised of the daily rates of charge.
(c) In so far as it is necessary to rely on Regulation 72A if there is a finding that the applicant has not complied with its disclosure obligations, Regulation 72A of the Legal Profession Uniform General Rules 2015 provides for disapplication as follows:
72A Non-compliance with disclosure obligations - disapplication of section 178(1) and (2) of the Uniform Law
(1) This rule applies where a law practice has contravened the disclosure obligations of Part 4.3 of the Uniform Law in relation to a particular matter.
(2) Section 178(1) and (2) of the Uniform Law do not apply in relation to the law practice (so far as they would otherwise apply to the matter concerned) in circumstances where the relevant authority, a costs assessor, a court or a tribunal is satisfied that -
(a) the law practice took reasonable steps to comply with the disclosure obligations of Part 4.3 of the Uniform Law before becoming aware of the contravention, and
(b) the law practice, no later than 14 days after the date on which it became aware of the contravention, rectified the contravention, as far as practicable, by providing the client with the necessary information required to be disclosed under Division 3 of Part 4.3 of the Uniform Law (including, where relevant, an estimate or revised estimate of the costs), and
(c) the contravention was not substantial and it would not be reasonable to expect that the client would have made a different decision in any relevant respect.
(3) Subrule (2)(b) applies even though the information or estimate is not provided at the times required by the disclosure obligations of Part 4.3 of the Uniform Law.
(4) In this rule -
client includes (where relevant) an associated third party payer.
relevant authority means the designated local regulatory authority for section 178 of the Uniform Law.
42 The respondent's evidence is that Mr Palmos discussed with her on 8 March 2017 a range of counsel's fees if he acted on her behalf. This discussion took place at a time when the respondent was seeking to persuade the applicant to act on her behalf and before the retention of counsel was undertaken. When the second costs agreement was given to the respondent the applicant advised the respondent that Mr Casey and Mr Kumar had agreed to act in the matter. The costs disclosure included an estimate of total legal costs broken down to estimate both professional costs and disbursements. The costs disclosure did not advise the basis on which counsel would calculate their costs or a separate estimate of counsels' total legal costs. Counsel was not retained until the briefs were delivered to them in late August 2017. In my view, the disclosures in section 175(1) were not required to be given until the briefs were delivered. I am also of the view that the applicant made a reasonable endeavour to update the disclosure of total legal costs as soon as Mr Palmos became aware of the significant change in the matter caused by counsels' disclosure of their daily rates.
43 The respondent submitted that a lawyer who knowingly provides an estimate of costs that does not reflect the lawyer's understanding of the likely costs based on taking steps to engage a particular counsel for example is a failure to disclose. It is implicit that an estimate of total legal costs must be a genuine attempt by the lawyer to ascertain and calculate the likely total legal costs as only by doing so can the objectives of the LPUL be achieved.[36] In April 2017, when the costs disclosure was given to the respondent, the applicant's estimate of total legal costs was $300,000 if the matter ran to verdict and reflected the applicant's understanding of likely costs based on his knowledge at the time and his experience in similar matters. From then on and until 21 September 2017 this appeared to be a reasonable estimate given the knowledge of the applicant in that period. When junior counsel advised Mr Palmos on 21 September 2017 of the intended daily fees of Mr Casey and himself Mr Palmos became aware of a significant change to the previous costs disclosures and the next day updated the costs disclosure.
44 I am satisfied that the applicant took reasonable steps to comply with its costs disclosure obligations and that the respondent would not have made a different decision in retaining Mr Casey and Mr McWilliams. This view is supported by the respondent's letter of 2 October 2017 when, after a conference with counsel, she wrote:
Further, please thank Dugald and Mr Casey for the way they're handling my matter. My impression from the first meeting was that at last I have a "team" that is actually going to fight for my best interests. A team interested in prosecuting the all-round injustice I've suffered die to a "protected and empowered" workplace bully**.**
45 The letter does not comment or complain about counsels' daily fees, the updated costs estimate and does not raise issues with the costs disclosures given. The letter led the applicant to believe that the respondent was satisfied with the counsel briefed and their fees. Therefore, in respect of preliminary issue (c), the applicant did not fail to make disclosures of counsels' fees or at all. In respect of preliminary issue (d) the counsel briefed to appear did not increase their daily fees and as soon as the applicant was advised of the daily fees updated disclosure of total legal costs as required by section 174(2).
Preliminary issue (e) - Are the fees of Terry Casey QC an 'unusual expense' that required express instructions from the respondent prior to briefing? If so has Order 63.60 of the Supreme Court (General Civil Procedure) Rules 2015 been breached?
46 The respondent submitted that Mr Casey's fee of $11,000 a day was not a 'fair and reasonable fee', that the certified daily rate of fees at $8,800 was fair and reasonable and Mr Casey's fees should be reduced to the certified charges. The respondent did not, however, adduce evidence of the usual or going rate of charge in 2017 of other Senior Counsel briefed to appear in matters that were similar to the respondent's Workcover Damages trial on a solicitor-client basis. The matter was listed for at least a 10-day trial. Mrs Dealehr referred to sections 172 and 200 of LPUL which list the criteria that should be considered by the Costs Court when assessing whether counsels' charges are 'fair and reasonable' fees. Section 172 states that a law practice must not charge fees that are more than fair and reasonable in all the circumstances and lists a number of criteria to be considered by the Court when assessing that legal costs are 'fair and reasonable'. Section 200(1) provides that a costs assessor must apply the principles in section 172 so far as they are applicable. Section 200(2) states that a cost assessor may consider if the work complied with the Uniform Law and Rules, any costs disclosures made including whether it would have been reasonably practicable for the law practice to disclose the total legal costs at the outset (rather than simply disclosing charging rates) and any advertising of the costs or skills of the law practice and any other relevant matter.
47 The respondent submitted that she was unable to make an informed choice about her counsel as neither counsel gave disclosure of the basis on which legal costs would be calculated and did not give estimates of their total charges. The effect of these failures was that the respondent was prevented from knowing or understanding the costs implications for her of continuing to retain Mr Casey and Mr McWilliams. The respondent swears that had she been aware of the daily rates of counsel and the estimate of total costs that she would have instructed the applicant to engage other counsel prepared to charge a lower daily rate[37].
48 The respondent submitted that the fees of counsel were an unusual expense and referred to Rule 63.60:
63.60 Taxation between solicitor and client
(1) Costs not reasonably incurred or not of reasonable amount may nevertheless be allowed to a solicitor against a client if -
(a) the costs were incurred with the authority of or the amount was authorised by the client; and
(b) before the costs were incurred the solicitor expressly warned the client that the costs might not be allowed on a taxation of costs as between party and party.
(2) An authority for the purpose of this Rule may be express or implied.
49 The respondent submitted that there was a five month delay from when instructions were given by her to the applicant, including the briefing of good senior and junior counsel[38] until details of counsels' daily fees were given to her. The advice was given three weeks before the trial was listed to commence and three weeks after the briefs were delivered. This delay prevented her from giving instructions to brief different counsel at a lower rate. The disclosure was only of counsels' daily rates and she was never given an estimate of their total legal costs. In that regard the respondent submits that the letter of 22 September 2019 did not give details of any significant change to anything previously disclosed[39] as this was the initial disclosure of the basis of charge of counsels' fees and did not give an estimate of counsels' total legal costs.
50 Paragraph 1 of the costs disclosure states that If there are disbursements to be incurred that are unusual, we will seek your instructions before incurring the expense. Further the respondent submits that the applicant did not consult her before incurring the expense and did not provide statements setting out the rates and estimated cost of any other law practice we propose to engage as soon as the retained law practice provides this information to us.[40] This failure to consult on the rates of senior counsel's fees and to advise an estimate of counsel's total legal costs, the respondent submits, prevented her from making informed choices at the commencement of the second retainer, after 22 September 2017 and at time the matter settled.
51 During the conduct of the trial the trial judge had referred the matter to a judicial mediation which was conducted on 18 October 2018. The mediation was held on the second day of the Hearing after the respondent's Counsel had opened her case. The respondent submitted that both the applicant and counsel failed to comply with their disclosure obligations contained in section 177 at the time they sought instructions to make an offer of compromise to the defendants. The mediation was concluding at the time she gave instructions for the offer of compromise.[41] The respondent submitted that she did not receive a reasonable estimate of the amount of legal costs payable by her if the matter settled and a reasonable estimate of any contributions toward those costs likely to be received from another party.[42] The respondent submitted that when a client gives instructions at the conclusion of an unsuccessful mediation to make an offer of compromise this is in effect execution of terms of settlement and the disclosures required by section 177 must be given. This submission fell by the wayside when the solicitor's file note of the mediation was produced at the hearing and included detailed notes of discussions about the respondent's legal costs including her likely costs recovery and an estimate of solicitor and client costs payable in addition to the costs recovered from the defendants. These costs disclosures were given before instructions to make the offer were given.
52 The respondent submitted that the effect of the failure of the applicant to make disclosures is that:
as a consequence of these disclosure failures the applicant cannot rely on its conditional cost agreement. It is void for the various reasons and on that basis it can't enforce its uplift and it can only charge fair and reasonable costs. And we'd have to take into account added taxation 172 and 200.
We would say that looking at what happened in the case of Johnson v LDA Legal, which is Dimos Lawyers, which was a recent decision, again of Associate Justice Wood. That would be a matter, when we proceed through the taxation, that we'd look at the way the work is done and then determine what - if the fees, say, particular, say drawing an affidavit, the fee claimed, when taken into account all of those costs, are, in fact, fair and reasonable. [43]
53 In respect of counsel's fees the respondent submitted that any agreement as to the rates is void and that only 'fair and reasonable' rates should be allowed. The question of what is 'fair and reasonable' should be considered during the taxation once evidence of the rates of reasonable counsel is available. However, a starting point to determine fair and reasonable rates would be to allow only those fees that were certified by the trial judge at the conclusion of the matter.[44]
54 The applicant in reply submits that an engagement of Senior Counsel in a proceeding such as the applicant's is not unusual. Further that Mr Casey's fees on a solicitor client basis are not unusual in amount for a complex proceeding, listed for a hearing of 10 or more days, involving both workplace bullying and an assault by a fellow worker. The respondent's evidence was that the ability of the applicant to secure good senior and junior counsel was a determinative factor in retaining the applicant [45] and the applicant submits that this is what was done.
55 The respondent, after receipt of the 22 September 2017 costs update, confirmed her instructions to retain both counsel as detailed in paragraph 44 above. This email was sent after a conference with Mr Palmos on 2 October 2017 where the costs update was discussed among other things. At that conference the respondent did not raise any concerns about counsels' fees or the revised estimate of total legal costs.[46]
56 In respect of Rule 63.60, the applicant submits that the client authorised the briefing of Mr Casey and was warned that his fees would likely be certified at a lesser amount than the daily fees rate.[47] There is no doubt that the respondent gave instructions to retain Mr Casey at the commencement of the second retainer, approved his continued retention from 22 September 2017 when fully advised of his daily fee and was warned that the fees of counsel might not be fully recovered. Dal Pont in Law of Costs Edition 4[48] states that:
An expense can be 'unusual' either because it is not ordinarily incurred, or due to its amount. An example of an expense made unusual for its quantum is counsel's fees that well exceeds the understood or recommended scale of counsel's fees applicable in the circumstances. Moreover, what may appear as not unusual at the outset, may become so if the counsel's costs blow out with time. ...................
Given that, for instance, the engagement of multiple counsel, or charging of a reading fee, may be necessary or proper in certain cases, that an expense is unusual so as to require a Blyth warning in one case does not mean that it attracts the same obligation in another. ............ The presence or absence of a scale fee for the item in question is relevant but not conclusive, the court inquiring into 'the nature of the act done, or [whether] the amount charged is in excess of the amount fixed by the scale or usually charged'.
57 The respondent did not adduce evidence as to whether it was usual practice to engage senior counsel or what usual daily fees of senior counsel in WorkCover damages claims, on a solicitor and client basis, were at the time. Instead she was submitted that I should take judicial notice of the use of senior counsel and the daily fees charged. In this matter it is not a question of whether counsels' fees were certified at a lesser rate than the certified daily fee or the applicable maximum in the Supreme Court scale of costs for costs to be paid above that rate on a standard basis by the unsuccessful party. Mr Casey marked his back sheet as follows:
5 days preparation @$11,00 per day $55,000.00
5 days of Court @ $11,000 per day $55,000
Total $110,000
58 Included in Mr Casey's brief, which was produced at the hearing was a document prepared by Mr Casey detailing his attendances on the brief. That document shows that between 30 August 2017 and 6 October 2017 he undertook 12.75 hours of work. From 9 to 13 October 2017 he undertook 5 days of preparation and conferences and on 15 October 2017 he spent 5.5 hours preparing an opening. However his marked fees for preparation and conferences were the 5 days and it is clear that he did not charge for 18.25 hours of work he undertook on the respondent's behalf. There is no evidence before the Court of whether senior counsel's rate was so excessive as to constitute an unusual expense. The respondent was advised on 22 September 2017 of senior counsel's daily fee and the likely amount that would be certified by the Court and on 2 October 2017 she confirmed that she was satisfied with the counsel engaged in the matter. For these reasons I do not find that the fees of Terry Casey QC constitute an unusual expense that required express instructions from the respondent prior to engagement.
Preliminary issue (f) - Did both Terry Casey QC and Dugald McWilliams fail to disclose the basis of charge and give an estimate of total legal costs as required by section 175(2)? If they have failed to give the disclosures required by section 178(1)(b) are these fees payable until the costs are reviewed? What implications would the disclosure failure have for the payment of cost of the review?
59 The orders made following the mediation were that Pursuant to Section 198(8) of the Uniform Law, by 2 September 2019 Ellis Palmos (the Respondent in the preliminary hearing) serve the following documents on Terry Casey QC and Dugald McWilliams and thereafter, Terry Casey QC and Dugald McWilliams shall be taken to be parties to the assessment ("Other Parties"). Both counsel were served with the documents, as ordered. However neither counsel chose to appear at the hearing. Section 198(9) provides that:
(9) A person who is notified by the costs assessor under subsection (8) -
(a) is entitled to participate in the costs assessment process; and
(b) is taken to be a party to the assessment; and
(c) if the costs assessor so determines, is bound by the assessment.
60 The respondent submitted that at no time prior to the 21 September 2017 phone call between Mr Palmos and Mr McWilliams did counsel advise the applicant of their daily fees or give an estimate of their total legal costs. Therefore the only conclusion the Court can draw is that counsel failed to comply with their requirements under Section 175(2) and 174(1)(a) of the LPUL.[49]
61 In reply the applicant says that both counsel have been joined as parties to the proceeding and entitled to make their own submissions. Counsels' obligations are limited to s 175(2) of the Act.
62 In the absence of submissions from Mr Casey and Mr McWilliams as to their obligations to disclose the basis of charge or an estimate of total legal costs the only finding that can be made is that they have failed to comply with their section 175(2) obligations. The parties have not addressed the Court on the costs implications of any findings of failures to disclose and this question can be addressed at the conclusion of the costs review of the bill of costs.
And Preliminary issue (g)- Do the disclosure failings of the applicant require the applicant to pay the respondent's costs of the review pursuant to section 204(2)(a) and (b)?
63 In the light of the reasons and findings made above that the applicant has not breached its costs disclosure obligations of sections 174(1)(a) and (b) and section 175(1) section 204(2)(a) and (b) is not triggered.
64 In Cameron& Anor v Thompson Geer [2020] VSC 75 Associate Justices Wood states:
65 I have found that the applicant did not breach its costs disclosure obligations and that the second, conditional Costs Agreement is not void. The assessment of the bill of costs will take place pursuant to the Supreme Court scale and a 25% uplift of allowed professional costs will be applied.
66 The parties should consider the issue of the costs of the preliminary hearing and any directions required for the filing and service of objections, including whether an inspection of the file is warranted. I will await the parties' advice on an estimate of hearing days and suitable dates. The parties may agree that a resumption of the mediation may be appropriate.
67 These reasons are to be served on Mr Casey QC and Mr McWilliams by the applicant within seven days of today.
68 Liberty to apply is granted in the event that consent in relation to these matters is not possible.
[1] Affidavit of Zuzana Pravlik sworn 16 September 2019 (Applicant's affidavit) at para 35 and 36.
[2] Applicant's affidavit paras 41 - 42.
[6] Applying item 17 of the Supreme Court scale of costs.
[8] Palmos affidavit at para 5; Respondent's first affidavit at para 18 -19.
[11] First affidavit of Jim Palmos sworn on 7 October 2019 at para 5.
[17] The bill of costs includes between items 526 and 527 the heading Costs on a Solicitor/Client Basis pursuant to the signed Costs Agreement.
[18] First Palmos affidavit at para 14 and exhibit JP-1.
[19] This is referred to in the second paragraph of the 20 April 2017 letter reproduced at paragraph 15 above.
[20] First Palmos affidavit at para 14. Mr Palmos swears that the file was in disarray.
[22] Exhibit "ZP-8" to the respondent's affidavit.
[23] First Palmos affidavit at para 6 and items 631 and 849 of the bill.
[24] Transcript lines 28 page 32 to line5 page 33.
[25] Affidavit sworn 16 September 2017 at paragraph 19.
[26] First Palmos affidavit at paragraph 14.
[27] First Palmos affidavit at paragraph 21.
[28] Letter dated 22 September 2017, ''ZP-10"
[30] Transcript page 34, lines 19 - 29.
[31] Transcript page 36, lines 16 - 24.
[33] This section is has the same wording as section 175 LPUL.
[35] Transcript page 40, lines 13 - 21.
[36] Respondent's written submission at paragraph 23.
[37] Respondent's first affidavit at paragraph 29- 32.
[38] First Pravlik affidavit at paragraph 16.
[41] The offer of compromise was accepted by the defendant on 22 October 2018.
[42] Respondent's written submissions at paragraph 33.
[43] Transcript page 47 lines 26 - page 48 line 10.
[44] Respondent's written submission paragraph 35.
[45] First Pravlik affidavit at paragraph 16
[49] The respondent's submission at paragraphs 30 and 31.
Ellis Palmos
Pravlik [2020] VSC 112
LEGAL COSTS - Fees of Senior Counsel an 'unusual expense' - Rule 63.60, Marriner v Meerkin & Apel [2019] VSC 36, Farrar v Julian-Armitage & Anor [2015] QCA 289 Cameron& Anor v Thompson Geer [2020] VSC 75.