Colbron v Freeman

Judgment 1HER HONOUR: This is an appeal against a decision of the Local Court in a dispute arising between a barrister and solicitor over payment of the barrister's fees. For reasons that were not clear, the appeal came before me as duty judge. 2The plaintiff in the proceedings below was Mr Rodney Freeman, the barrister, who is the respondent to the appeal. The defendant in the proceedings below was the solicitor, Mr Warwick Colbron, who is the appellant. In order to avoid confusion, it is convenient to refer to the parties by their names. 3The amount involved in the proceedings below was approximately $20,000 in legal costs rendered in fee notes issued by Mr Freeman to Mr Colbron. The proceedings were commenced in the Local Court by statement of claim filed by Mr Freeman on 27 February 2013. By an amended defence filed on 21 May 2013 Mr Colbron contended, amongst other things, that since Mr Freeman had made an application to have his fees assessed pursuant to division 11 of part 3.2 of the Legal Profession Act 2004, and since the assessment was not yet "completed", Mr Freeman was not entitled to proceed with the claim in the Local Court. 4Mr Colbron's defence invoked s 355(b) of the Legal Profession Act, which provides: 355 Consequences of application If an application for a costs assessment is made in accordance with this Division: (a) ..... (b) the law practice must not commence or maintain any proceedings to recover the legal costs until the costs assessment has been completed. 5The Magistrate did not determine that issue. His Honour found that there was a valid costs agreement in place when the services charged for in the disputed accounts were undertaken. In light of that finding, his Honour said: "There is no need for me to determine whether the return of the costs assessment application by the costs assessor to the manager costs assessment without the making of a determination means the assessment was completed or not." 6The parties are in agreement in the present appeal that his Honour ought to have determined that issue, since it was a matter raised on the pleadings. The critical issue is what flows from that concession. 7Mr Colbron submits that s 355 confers statutory immunity such that, where a costs assessment has been sought and not completed, there is no jurisdiction in the Local Court to determine a costs dispute. That contention was not specifically disputed in the hearing of the appeal before me. Secondly, Mr Colbron submits that the assessment in the present case was not "completed" within the meaning of s 355. That contention is disputed by Mr Freeman and is, in effect, the sole issue raised in the appeal. 8Mr Freeman's position is addressed in a notice of contention filed 11 August 2014 in which he contends that the decision of the Magistrate should be affirmed on the following grounds: His Honour ought to have held that the costs assessment involving the defendant (as costs applicant) and the plaintiff (as costs respondent) was completed for the purposes of s 355(b) of the Legal Profession Act 2004 (NSW) (the LPA) when the costs assessor returned the relevant file to the Manager, Costs Assessment without making a determination. His Honour ought to have held that LPA s 355(b) did not operate to preclude the defendant from commencing or continuing to prosecute the proceedings in the court below. 9The circumstances in which that issue arose are as follows. Mr Freeman, as I think is common ground, undertook the provision of some legal services at the request of Mr Colbron. He issued two fee notes which Mr Colbron refused to pay. Mr Freeman then took it upon himself to apply for an assessment under the Legal Profession Act. The assessment prompted an exchange of correspondence between the parties which, it appears, led the costs assessor to conclude that there were a number of issues between the parties raising "disputed facts" which she had no power to make a decision about. 10The assessor's conclusion was, I think, misconceived. The Act specifically provides in s 359(3) that for the purposes of determining an application for assessment, a costs assessor may determine whether or not disclosure has been made in accordance with division 3, and whether or not it was reasonably practicable to disclose any matter required to be disclosed under division 3, and whether a costs agreement exists and its terms. In any event, in due course the assessor returned the assessment to the manager, costs assessment purportedly in accordance with the regulations. 11The correspondence from the assessor was in the following terms: I refer to previous correspondence. I have received many submissions from the parties. It appears to me that the issues between the parties include:- 1. Whether there was a disclosure of fees; 2. Whether there was any agreement as to the fees and charges; 3. Whether the work itemised in the memorandum of costs an fees was performed. I consider al l of the above matters are disputed facts. It may also be suggested that the Cost Applicant sought assessment as no disclosure was made and s317 of the Legal Profession Act 2004 applies. However that position cannot be automatically presumed. What is of concern is that I have no power to make a decision over disputed facts arising between the parties and the issues set out above are all factual disputes. Pursuant to regulation 1238 of the Legal Profession Act 2004 I have the power to return the assessment to the Court. However before doing so, I shall allow the parties a further 14 days from the date hereof to make such submissions on these issues as they may wish. 12It should be acknowledged that, at the time the costs assessor decided to return the file, there was some authority for the position she took, in the decision of the Court of Appeal in Doyle v Chadwick [2007] NSWCA 159. After receiving the costs assessor's correspondence, Mr Freeman commenced the proceedings in the Local Court. As already noted, the position contended for by Mr Colbron was specifically pleaded in the amended defence filed in May 2013. 13Mr Colbron's position subsequently found express approbation in the decision of Beech-Jones J in Griffith v ABC [2013] NSWSC 750 published on 6 June 2013. I will return to the terms of that decision. Mr Colbron then wrote to the manager of cost assessment raising the decision of Beech-Jones J and inviting the manager, costs assessment again to refer the assessment for consideration by an assessor, contending that the proceedings in the Local Court could not be maintained until the costs assessment was "completed". Following a further exchange of correspondence between the parties, the manager, costs assessment ultimately declined to refer the assessment again. 14The manager set out the competing positions of the parties and concluded: "In this particular case and at this stage I will not be sending the matter back to an assessor again at the request of the costs respondent". 15It should be noted that, apart from expressly pleading the matter by way of defence, Mr Colbron also raised the issue whether the proceedings commenced by Mr Freeman could be maintained prior to the completion of the costs assessment in the context of an application by Mr Freeman for leave to adduce expert evidence. In addressing the Magistrate on that issue, Mr Colbron argued that the assessment was not "completed" and that the proceedings in the Local Court should not proceed so long as that was the case. 16In particular, Mr Colbron said: "There is a very fundamental issue of s 355 of the Legal Profession Act which statute bars the commencement of these proceedings and the maintenance of these proceedings where a costs assessment has been commenced under division 11, and it clearly was commenced." 17The Magistrate responded by observing that the only issue before him that day was whether to make an order for expert evidence. He noted that there was no motion to do anything else, and in due course it appears he proceeded to grant leave to Mr Freeman to adduce expert evidence as sought. 18The Magistrate ultimately proceeded to hear the matter which, I was informed at the hearing of the appeal, lasted some four days. As already noted, he determined the proceedings in favour of Mr Freeman and declined to determine the matter raised by the defence as to whether the maintenance of the proceedings was subject to the statutory immunity in s 355. 19During the argument about the expert evidence to which I have referred, the parties made reference to the fact that the proceedings were incurring a great deal of costs. The Magistrate remarked that, in his experience as a Magistrate, that seemed to occur most frequently in matters involving disputes between members of the legal profession, which his Honour described as "the most difficult cases that the Court observes". 20Unfortunately, that seems to characterise the dispute between the present parties. Regrettably, having regard to the amount of costs which must have been incurred in the proceedings in the Local Court, I have concluded that the costs assessment was not completed within the meaning of the section and, accordingly, that it was not open to Mr Freeman to prosecute his claim in that jurisdiction. As already observed, that is a conclusion which, in the present case, has not achieved the object of the legislation of providing a cheap, quick and efficient method of resolving costs disputes, but that is not the test. 21In Doyle v Chadwick, Hodgson J said, at [61]: In my opinion, Davies AJ was correct to say that a costs assessor, assessing costs between a lawyer and client, can determine disputes as to the terms of the costs agreement, and Dunford J was wrong to say otherwise. However, where the existence of the terms of the agreement are in dispute in a way that would require the hearing of evidence to resolve, it may be appropriate for the costs assessor to decline to resolve the dispute; and in the Muriniti litigation, it would in my opinion have been open and reasonable for Davies AJ to have permitted the question to have been determined in the proceedings before him. As it turned out, the costs assessor did decline to resolve this question; and in my opinion, in those circumstances, the costs assessor should not have issued a certificate which could be converted into a judgment. That is, in a case where there is a real dispute on substantial grounds as to whether any costs are payable, a costs assessor should not complete an assessment by issuing a certificate unless satisfied that the costs are payable, because the certificate can be filed so as to take effect as a judgment. 22I would respectfully disagree with his Honour's conclusion that there are circumstances in which it may be appropriate for a costs assessor to decline to resolve a dispute of the kind that was raised in the present matter. I would respectfully adopt the reasons stated by Beech-Jones J in Griffith. Unfortunately, it appears from the report of Beech-Jones J's judgment that he was not taken to the remarks of Hodgson J set out above. Nonetheless, his Honour did consider competing obiter dicta remarks of two different judges in the same decision in the case of Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474. His Honour observed that there was a divergence of views between Basten and Santow JJ in that case and preferred the conclusion stated by Santow J. Beech-Jones J said at paragraph [46]: The consequence is that I prefer and will act upon the approach stated by Santow JA in Wentworth v Rogers at [40]. Thus, I will approach the balance of the application on the basis that it is the cost assessor's duty and function to determine as best he or she can such issues of fact and law as arise on the cost assessment in order to discharge their function under s 367 of the Act. If a cost assessor were to refuse to do so, then relief in the nature of mandamus would be available to require them to do so. 23It seems to me that that is the position that arose in the present case. The costs assessor was wrong to refuse to determine the issues raised by the application. The appropriate course at that point was for Mr Freeman to seek relief in the nature of mandamus as contemplated in the remarks of Beech-Jones J to which I have referred. The terms of s 355 are quite plain. In the absence of the completion of the costs assessment process, which it must be observed had been invoked by Mr Freeman himself, it was not open to him to prosecute his claim in the Local Court. 24Mr Freeman in the proceedings before me relied on my remarks in the matter of Coshott v Barry (2012) NSWSC 850, where I said (at [41] and [42]): 41. In my view, the defendants' submissions in the present case misconceive the juridical foundation of the costs assessment system. A solicitor's entitlement to lodge an application for a costs assessment is not a source of right or title in itself. It is an aspect of the regulation of the legal profession under the Legal Profession Act 1987. The Act creates an administrative mechanism for quantifying legal costs in a variety of circumstances, some of which raise no limitation issue (such as costs ordered by a court). To the extent that it provides for the assessment of costs payable under contract, I do not think it alters the fundamental nature of the right and title to those costs. 42. Support for that view may be found in the decision of the English Court of Appeal in Coburn v Colledge [1897] 1 QB 702 at 705-706, where Lord Esher MR said: Before any enactment existed with regard to actions by solicitors for their costs, a solicitor stood in the same position as any other person who has done work for another at his request, and could sue as soon as the work which he was retained to do was finished, without having delivered any signed bill of costs or waiting for any time after the deliver of such a bill. Then to what extent does the statute alter the right of the solicitor in such a case, and does the alteration made by it affect or alter the cause of action? It takes away, no doubt, the right of the solicitor to bring an action directly the word is done, but it does not take away his right to payment for it, which is the cause of action. The Statute of Limitations itself does not does not affect the right to payment, but only affects the procedure for enforcing it in the event of dispute or refusal to pay. Similarly, I think s 37 of the Solicitors Act, 1843, deals, not with the right of the solicitor, but with the procedure to enforce that right. 25However, whilst I remain of the view there expressed, that the costs assessment regime provided for in the Legal Profession Act does not alter the fundamental nature of the right and title to those costs, the simple fact is that the parties' rights at common law have been altered by the statutory regime, at least to the extent of affecting the procedure of enforcement in the event of a dispute, a matter expressly contemplated in the remarks of the Court of Appeal in the matter of Coburn v Colledge [1897] 1 QB 702 in the remarks set out above. What the statute plainly says, in unequivocal terms, is that an action cannot be commenced or maintained until the costs assessment process is completed. That approach makes some sense, as I observed earlier in my judgment in Coshott v Barry. 26The history of the costs assessment system is that it was introduced as part of the package of reforms effected by the Legal Profession Reform Act 1993. In Coshott v Barry at [16], I said: "Before then, legal costs were regulated by the prescription of maximum scale costs and were subject to 'taxation' by the court. That system was viewed as being overly formal, legalistic and complex. The reforms were intended to provide a 'faster, easier and cheaper system of review of bills of costs', largely removing caps on the quantum of legal costs that could be charged whilst introducing new measures for the protection of clients, including stricter disclosure obligations and the costs assessment system." 27One of the matters which appears to have been of concern to Hodgson J in his Honour's remarks in Doyle v Chadwick is the proposition that a costs assessor had no authority to compel the attendance of witnesses or to hear evidence or to allow cross-examination. His Honour referred to disputes where the existence of the terms of a costs agreement were in dispute "in a way that would require the hearing of evidence to resolve". That, however, begs the question. The plain purpose, in my view, of the costs assessment regime provided for in the Legal Profession Act is that such disputes should be resolved in a way that is fast and cheap. Parliament has evidently not considered it necessary for such disputes to be resolved by the hearing of evidence. 28As noted by Beech-Jones J in Griffith, the Act does plainly confer a fact-finding function on costs assessors and that function is, in a limited way, amenable to appellate review. I would, accordingly, respectfully adopt his Honour's reasons for concluding that a costs assessor to whom an assessment is referred is not entitled to return an assessment under regulation 128 without determining it. The nature of the powers and functions of the costs assessor is primarily to be found in the Act rather than in the regulations. Section 367 seems to me, plainly, to contemplate that the way in which a costs assessment must be brought to completion is by being determined in accordance with that section. 29It follows, in my view, that the proceedings in the Local Court contravened s 355 of the Legal Profession Act. The Magistrate ought to have held accordingly and, for those reasons, the notice of contention must be rejected and the appeal must be allowed. 30Subject to hearing from Mr Freeman, I would propose to accede to Mr Colbron's submission that, in the circumstances, the appropriate order is that judgment be entered in favour of Mr Colbron.