Croatian Community Centre (Qld) Ltd v Boss Lawyers Pty Ltd [2022] QCAT 94

Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 100

Booth v Helensvale Golf Club Ltd [1997] 2 Qd R 141

Council of the Queensland Law Society Inc v Roche [2003] QCA 469; [2004] 2 Qd R 574

Maguire and Tansey v Makaronis [1997] HCA 23; (1997) 188 CLR 449

Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412

• [1] The present application is one for costs. The respondent to the original application, Boss Lawyers Pty Ltd, applies for an order that its costs of and incidental to an application filed 13 November 2020 including the costs thrown away by the application filed 21 May 2021, and reserved costs, be met by the applicant, the Croatian Community Centre (Qld) Ltd (the Centre). That application for costs is opposed.

• [2] The Centre originally applied for an order pursuant to section 328(1) of the Legal Profession Act 2007 (Qld) ("LPA") that "a costs agreement, or if there are multiple, then any costs agreements, apparently entered as between itself and Boss Lawyers be set aside on the basis it is not (or they are not) fair or reasonable". The application was so worded because the Board of the Centre, which had been newly appointed, had no costs agreements among the documents they inherited, and Boss Lawyers refused to provide any copies. As a result, the Centre also sought, in that initiating application, directions that Boss Lawyers provide copies of any costs agreement, costs disclosure notices, invoices delivered pursuant to any costs agreements, and statements of the general and trust account ledgers for any file conducted pursuant to any costs agreements.
• [3] On the first return date of the application an order was made directing Boss Lawyers to produce any relevant costs agreements.
• [4] Simultaneously with the QCAT application proceedings were launched in the Magistrates' Court seeking orders regarding the construction of the costs agreements. Again, that was done without the benefit of having seen those agreements. The parties have both been aware from the outset that the remedies being sought were inconsistent.
• [5] Following disclosure of two costs agreements, and after some time deliberating, the Centre determined to amend their application. Correspondence was exchanged between the solicitors acting for the respective parties. An amended application was filed without leave. Eventually at a direction hearing in May 2021, an order was made giving the Centre leave to amend. On 9 June 2021 Boss Lawyers by their solicitors' correspondence, sought that the Centre withdraw their amended application. On 1 July the Centre wrote indicating they would do so. On 8 July 2021 the Centre withdrew the proceeding. The proceedings in the Magistrates' Court continues.

• [6] This is generally a no costs jurisdiction, see section 100 Queensland Civil and Administrative Tribunal Act 2009 (Qld) ("QCAT Act"). The tribunal may order one party to pay another parties' costs where the "interests of justice require" that such an order be made, pursuant to section 102(1) of the QCAT Act.
• [7] Section 102(3) provides:

(3) In deciding whether to award costs under subsection (1) or (2) the tribunal may have regard to the following -

(a) whether a party to a proceeding is acting in a way that unnecessarily disadvantages another party to the proceeding, including as mentioned in section 48 (1)(a) to (g);

(b) the nature and complexity of the dispute the subject of the proceeding;

(c) the relative strengths of the claims made by each of the parties to the proceeding;

...

(e) the financial circumstances of the parties to the proceeding;

(f) anything else the tribunal considers relevant.

• [8] To appreciate the relevance of those various factors it will be necessary to examine the original issues and concerns held by the Board of Directors of the Centre that prompted the original application.
• [9] Before doing so I note the helpful observations of Alan Wilson J in Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412 at [4]:

"the phrase 'in the interests of justice' is not defined in the Act but is to be construed according to its ordinary and plain meaning, which obviously confers a broad discretionary power on the decision-maker."

His Honour went on to identify (at [29]) the crucial question under the Act as follows:

"Under the QCAT Act the question that will usually arise in each case in which costs are sought is whether the circumstances relevant to the discretion inherent in the phrase 'the interests of justice' point so compellingly to a costs award that they overcome the strong contra-indication against costs orders in s 100."

• [10] I note too the observations of MacKenzie J in Booth v Helensvale Golf Club Ltd [1997] 2 Qd R 141 at page 142 concerning the principles to apply where, as here, a matter is withdrawn prior to a determination on the merits. It is "appropriate to determine whether the applicant acted reasonably in 
commencing the proceedings" and "in some cases it may be appropriate to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation."

• [11] I note that the essential argument advanced is that the original application was without any merit and should never have been advanced. The eventual withdrawal of the application after futile amendment demonstrates the point.
• [12] The essence of the response to that argument is that through the deliberate actions of Boss Lawyers, the Centre were deprived of essential information on which to determine the best way forward, that the application in its original form did have prospective merit, that an alternative form of relief is now being pursued through the Magistrates' Court, and that all reasonable steps were taken to minimise costs in this Tribunal.

• [13] By way of background Boss Lawyers had the Centre, by its then office bearers, enter into certain costs agreements. One is dated 3 December 2018, the other 17 July 2019. Those original office bearers who dealt with the respondent were subsequently removed by the members and new officers duly elected. This occurred at an AGM held on 1 December 2019.
• [14] Boss Lawyers alleges that those agreements, properly construed, take away the applicant's right to seek an itemisation of any invoice and review of any costs charged. Those agreements are in evidence before me. The earlier in time does not have the effect contended for - there is no clause in it touching on the point. The second agreement in time, confusingly purportedly executed, according to the dates it bears, the day before it is said to have come into existence, contains a clause to that effect but also contains clauses to the contrary effect. The proper construction of the costs agreements is presently the subject of proceedings initiated by the Centre in the Magistrates' Court. Those proceedings were commenced simultaneously with the proceedings in this Tribunal.

• [15] In the lead up to the 2019 AGM one member of the Centre, Mr Frank Zepackic, sought orders from the Supreme Court that the Centre, then under the control of the previous office bearers, produce for inspection membership records and copies of all proxies held relating to the 2018 AGM. According to the affidavit of the present secretary, Mariya Gustini, concerns had been expressed by some members about the conduct of the Centre's affairs as early as 2018. Those concerns no doubt prompted Mr Zepackic's application. After a contested hearing Brown J ordered the production of documents for Mr Zepackic's inspection and that the Centre pay a proportion of his costs. One Mr Bilic, in his then capacity as Director and treasurer of the Centre, opposed the application.
• [16] The removal of the previous office bearers at the 2019 AGM was not without controversy. Those previous office bearers purported to cancel the AGM, on what grounds I cannot determine. Following the AGM the previous office bearers contended, through their solicitors Boss Lawyers, that the 2019 AGM was invalid and that they continued to hold office.
• [17] By letters of 5, 12, 19 and 23 December 2019, Boss Lawyers purported to write on behalf of the Centre, but plainly on instruction from Mr Bilic and presumably other outgoing office bearers, to the incoming office bearers to the effect (and I paraphrase substantially) that the 2019 AGM was invalid, that the present office bearers were invalidly appointed, and that they should desist from holding themselves out as directors of the Centre or interfering in the Centre's business until an extraordinary general meeting was held in February, a meeting arranged at Mr Bilic's instigation.
• [18] Despite those letters, at a meeting held on 22 December 2019 between Mr Zepackic, representing the incoming Board, and Mr Bilic and other members of the outgoing Board, all records of the Centre held by the outgoing Board were purportedly handed over. The incoming office bearers were unable to locate among the records of the Centre so supplied, save for a few exceptions, any costs agreements, invoices or statements of account from Boss Lawyers.
• [19] The incoming Board eventually caused an application to be filed in the Supreme Court on 10 February 2020 seeking declarations as to the validity of the appointment of the new office holders. On 14 February 2020 Flanagan J in effect declared that the present office holders were validly appointed on 1 December 2019.

• [20] I note that in several subsequent written communications addressed to the incoming Board, Boss Lawyers have contended that the effect of that declaration was to "backdate" the appointment of the incoming office bearers to 1 December 2019. That contention is wrong and involves a fundamental misunderstanding of the effect of declaratory relief. The incoming office bearers hold office by reason of the vote of the members on 1 December 2019, not because Flanagan J declared that to be so. His Honour's declaration was of an existing right, a right that the outgoing office bearers, and through their solicitors, Boss Lawyers, had disputed. As PW Young said in the second edition of his text "Declaratory Orders": "The effect of the court's order is not to create rights but merely to indicate what they have always been...".[1]

• [21] The timing of entry into the costs agreement could reasonably have been of concern to the incoming Board members. The relevant agreement was put in place in July 2019 replacing a costs agreement already in place from 2018 that presumably safeguarded Boss Lawyers interests well enough but without the clauses excluding Chapter 3. As Ms Gustini said in her affidavit, problems were brewing in the Centre prior to the 2018 AGM. Indeed, she relates that when the incoming Board members took control they found that all available monies had been withdrawn from the Centre's bank accounts and the Centre "abandoned". The new agreement had the effect of concealing from external review the nature of the matters that outgoing members had been expending legal fees on, should a change of the Board come about.
• [22] The invoices obtained by the Board were also liable to cause concern to the incoming Board members as to the validity of the charges that were being incurred. For example, one invoice detailed work described as "review cases re breach of Australian Solicitor rules 4 34". Another detailed: "telephone out to N Bilic regarding code of conduct and police complaint". Other invoices concerned advices re defamation law and champerty. There were other examples. The invoices total claims for over $50,000 worth of work.
• [23] The issue here is not for me to determine whether the charges were validly made against the Centre, but rather whether the incoming Board members had legitimate grounds to be concerned and to justify taking legal action. They plainly did.

• [24] The incoming Board members asked Boss Lawyers for copies of all costs agreements. The respondent refused that request on the ground that copies had already been provided. Boss Lawyers have never identified to whom, when or how those copies were supplied to the Centre.
• [25] Boss Lawyers were of course well aware that any costs agreements entered into by the Centre were entered into by the outgoing Board and if copies had been provided, they were given to the outgoing Board members, and that the incoming members may well not have those copies. By their initiating application the Centre then asked this tribunal to direct that the costs agreements be produced. The application also asked that the costs agreements be set aside as unfair and unreasonable - costs agreements that the incoming Board members had not yet seen.
• [26] In response to that request for a direction that the missing costs agreements be produced, at the first return date of the initiating application on 15 December 2020, this tribunal unsurprisingly ordered Boss Lawyers to produce those missing costs agreements. They were then produced on 17 December 2020 by email.
• [27] That refusal to provide copies of existing agreements, which purportedly so severely curtailed the rights of the Centre, was grossly unreasonable. An order was required and obtained to force their production.

• [28] Presumably the incoming Board members were concerned that Boss Lawyers contended that the Centre had no right to review and challenge whatever the respondent wished to charge the Centre, particularly in circumstances where they were concerned that the affairs of the Centre had not been properly conducted for some considerable time. But following 1 December 2019, there emerged further grounds for concerns. Boss Lawyers purported to act for the Centre when in fact they were acting on behalf of ousted, disaffected Board members. Did they seek to charge the Centre for the work performed for those disaffected members?
• [29] No itemised account having been provided no-one knows what Boss Lawyers claim for, but Mr Cohen, in his submissions on their behalf, seemed to be claiming that Boss Lawyers had that right.
• [30] Mr Cohen sought to argue that the situation post 1 December 2019 was analogous to a solicitor acting for a client who has, unknown to the solicitor, lost capacity. Analogies can be misleading and this one certainly is. The danger is in the premise - the assumption that the advancing condition is reasonably not known to the solicitor. Here Boss Lawyers knew perfectly well that an AGM had been held and new office bearers elected. The incapacity of the former members was stark.
• [31] Certainly, after 1 December 2019 Boss Lawyers have no colourable right to charge the Centre for work undertaken on instructions from disaffected outgoing office bearers. Boss Lawyers must look to those who instructed them for payment of any costs incurred after 1 December 2019 and in attacking the election of the incoming Board.
• [32] Suffice to say that the incoming Board members have good grounds for investigating the legitimacy of the costs the Centre is being asked to pay. They are criticised by Boss Lawyers for the path that they took.

• [33] With that background I turn then to the fundamental point raised by Boss lawyers namely that the relief sought was unarguable. I am far from satisfied that that was so.
• [34] In the usual course the law provides that clients do have the right to have an itemised account and a right of review of costs charged.[2] That is a very valuable safeguard put in place to protect clients who are usually in a very vulnerable position vis-a-vis solicitors.
• [35] Boss Lawyers contend that the Centre being a public company was by definition a "sophisticated client" for the purposes of section 300 and section 311(1)(c)(ii) of the LPA and so entitled to contract out of the provisions of Chapter 3.[3] This is of course a legal fiction. The Centre is a community centre. Its affairs are run by interested members of the Croatian community. It is in the nature of such bodies that office holders come and go, that corporate memory can be non-existent, and that the Board members have varied levels of business experience.
• [36] The Centre is about as far as one can get from a "sophisticated client" that sections 300 and 311 envisage and on which Boss Lawyers rely. It is one thing to have an entitlement to do something, it is quite another question whether it is in your interests to do so. The evidence is silent as to what advice was given as to the desirability of entering into such a bargain. I cannot see that there is much advantage to the Centre in doing so. And there is one very significant disadvantage - an incoming Board cannot determine the validity of the actions of the outgoing Board.
• [37] Mr Robinson, who appeared for the Centre, submitted that the relief originally sought here - a declaration pursuant to section 328(1) of the LPA that the agreements were unreasonable and unfair - did have merit, but the Centre's difficulty was that no witness with the relevant knowledge were prepared to assist. I took that as a refence to the unwillingness of outgoing Board members, who were familiar with the dealings between Boss Lawyers and the Centre that resulted in the costs agreements being entered into, to assist.
• [38] It is evident from the relevant legislative provisions that such information can be vital. Section 328 of the LPA provides in subsection (2) as follows:

(2) In deciding whether or not a costs agreement is fair or reasonable, and without limiting the matters to which the Supreme Court or tribunal can have regard, the Supreme Court or tribunal may have regard to any or all of the following matters -

(a) whether the client was induced to enter into the agreement by the fraud or misrepresentation of the law practice or of any representative of the law practice;

(b) whether any Australian legal practitioner or Australian-registered foreign lawyer acting on behalf of the law practice has been found guilty of unsatisfactory professional conduct or professional misconduct in relation to the provision of legal services to which the agreement relates;

(c) whether the law practice failed to make any of the disclosures required under division 3;

(d) the circumstances and conduct of the parties before and when the agreement was made;

(e) the circumstances and the conduct of the parties in the matters after the agreement was made;

(f) whether and how the agreement addresses the effect on costs of matters and changed circumstances that might foreseeably arise and affect the extent and nature of legal services provided under the agreement;

(g) whether and how billing under the agreement addresses changed circumstances affecting the extent and nature of legal services provided under the agreement.

• [39] The matters described in paragraphs (a), (c), (d) and (e) each depend on evidence. The difficulty that Mr Robinson had in obtaining any help from witnesses went to the Centre's ability to properly understand its position and determine it best course. The Centre has made a tactical decision to proceed on the construction argument.
• [40] Two points may be made. A solicitor seeking to have a client enter into a costs agreement that may be disadvantageous to the client but advantageous to the solicitor must tread very warily. A fiduciary duty is owed to the client to ensure that an informed, independent judgement is exercised in entering into the agreement. It is arguable, at least, that the onus lies on the solicitor, not the client, to demonstrate that requisite advice was given including advice that the client had the right to seek independent advice.[4] The evidence is silent here as to what occurred.
• [41] Secondly, it is far from plain that the issues mentioned in sub-paragraph (f) above - changed circumstances that might foreseeably arise with a client such as the Centre - could not have sustained an argument, even absent contemporary evidence, that in context this agreement was unfair and unreasonable. Such circumstances included the disadvantage I previously mentioned - an incoming Board cannot determine the validity of the actions of the outgoing Board.
• [42] So for reasons unexplained Boss Lawyers had the Centre replace an existing cost agreement with one that was arguably contradictory in its terms, and which purportedly seriously eroded the rights of the Centre. The incoming Board might reasonably have thought that for solicitors, owing a fiduciary duty to their clients, to put in place such a costs agreement was arguably unreasonable and unfair. Much would depend on the information that was available to Boss Lawyers and the advice that they gave as to the reasons favouring adoption of the altered agreement. Nothing is known about these matters. As I have said the Centre had practical difficulties in obtaining information. That the Centre took some time to determine their best course was not unreasonable.

• [43] Whether the relief sought could have been obtained is but one aspect, albeit an important one, of the wider question as to whether the interests of justice require the usual rule concerning costs not to be followed. I turn to those wider issues.
• [44] Firstly, the Centre cannot be criticised for bringing inconsistent proceedings in two jurisdictions. From the outset the incoming Board were uncertain as to the Centre's rights or what remedy to seek. As they had not seen the costs agreements and had not been provided with any information as to why Boss Lawyers claimed the costs they did, that is understandable.
• [45] Secondly, there was a limitation period to manage. Section 335(5) LPA imposes a 12-month time limit on a sophisticated client seeking review of a costs assessment.
• [46] Thirdly, by the initiating application the Centre sought disclosure. They were successful. There was no reasonable basis for Boss Lawyers refusal to hand over the costs agreements. As the Centre submits Boss Lawyers brought that application on themselves by their intransigent attitude.
• [47] Fourthly, the Centre has acted reasonably in attempting to limit the wasting of costs. The proceedings in the Magistrates' Court were put on hold until the QCAT proceedings were determined. This was done following the suggestion of Bartley Cohen in their email of 10 February 2021. As I said earlier the proper construction of the costs agreement is before the Magistrates' Court.
• [48] Fifthly, there was not a great deal of wasted effort in this tribunal. While amended applications were served (and filed) without the necessary leave Bartley Cohen promptly pointed out that leave was needed. There was one directions hearing after the initial return date, held in May. The directions made concerned the leave to amend issue and the further progress of the matter. The solicitors for Boss Lawyers wrote on 9 June urging that the application be withdrawn. That was done on 8 July after an intimation on 1 July that course would be followed.
• [49] Since then, the only issue between the parties has been costs. Boss Lawyers seek that the Centre pay their costs incurred in this tribunal fixed at $8,500. Mr Cohen quite reasonably accepted that there was no evidence that would justify my fixing the costs at that level. Mr Robinson points out that the amount claimed falls at the very bottom of the Magistrates' Court scale and that the total amount allowed under that scale is $502.80.
• [50] Turning to the factors set out in section 102(3) of the LPA. I do not accept that the Centre has unnecessarily disadvantaged Boss Lawyers by its application. I have set out the relevant circumstances at length above. To a considerable extent Boss Lawyers have by their conduct brought this on themselves.
• [51] I note that in refusing to supply an itemised bill, Boss Lawyers have written three substantial letters to the Centre's solicitors which must have taken a deal of their time - one of 11 pages (1 October 2020), one of eight pages (18 November 2020) and one of nine pages (27 November 2020); they have corresponded with the Registrar of this tribunal concerning the conduct of the application; and they have engaged solicitors themselves who have rendered an account for in excess of $15,000, and that prior to the present hearing. I consider their approach inexplicable given that all their former client wanted was an itemised bill to understand what had gone before, matters of which Boss Lawyers knew they, the incoming Board members, were ignorant, in an effort to determine the rights of the Centre. Whatever an itemised bill costs to prepare here I suspect that the cost is dwarfed by the amount expended on this matter so far.
• [52] The nature and complexity of the dispute favours the Centre.
• [53] I am reluctant to say too much more about the relative strengths of the claims made. They are now before another Court. There seems good reason to think that Boss Lawyers are endeavouring to claim against the Centre for work done at the behest of former Board members and after their removal from office. If that is so, then the Centre is entitled to contest the charges. The relief sought here was not unarguable and many questions remain as to why Boss Lawyers saw fit to have the Centre enter into the second costs agreement.
• [54] I am not satisfied that the interests of justice require that a costs order be made.

• [55] In the premises I dismiss the application for a costs order.

[1] See Young PW, Declaratory Orders (2nd ed, Butterworths, 1984 at p 214).

[2] See the costs assessment provisions in Chapter 3 Part 3.4, Division 7 of Legal Profession Act 2007 (Qld).

[3] Legal Profession Act 2007 (Qld) s 344.

[4] See Council of the Queensland Law Society Inc v Roche [2003] QCA 469; [2004] 2 Qd R 574 at [11] per de Jersey CJ citing Maguire and Tansey v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 466.