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The parties

2. The appellants in this proceeding are Mr Wajira Danthanarayana and Mrs Maria Danthanarayana, (hereafter, the Clients). They were not sophisticated clients, as that term is understood in the Act.

3. The respondents on the appeal, but the applicants for costs assessment originally, are Ms Fogarty and Mr Ronald, who at the time this dispute arose traded as Colquhoun Murphy Lawyers (the Solicitors). They were each principal solicitors overseeing the matter but at different times. The conduct has been treated as coming from the Solicitors without distinction.

The assessment that is challenged on appeal

4. The certificate of assessment under challenge is that issued on 21 October 2022 in the amount of $195,922.32, plus interest on unpaid costs of $116,590.08. That amount comprised: (a) $124,473.57 of the Solicitors’ costs; (b) $30,000 in counsel’s fees paid by the Solicitors; and (c) $41,448 in unpaid counsel’s fees.

5. Those amounts actually total $195,921.57 in assessed costs and there appears to have been a slight miscalculation. The nature of the appeal

6. The application for assessment was made pursuant to s 296 of the Act. Although the application was to the court, that assessment was delegated to a registrar, which includes a deputy registrar: rr 5(4) and 6250(3)(k) of the Court Procedures Rules 2006 (ACT) (the Rules).

7. The appeal of a registrar’s decision is then available under r 5012 of the Rules, with such an appeal to be conducted on a hearing de novo basis: r 6256(4) of the Rules; see also Merrilees v R [2014] ACTCA 10 at [19] and the authorities there-cited. Grounds of appeal need not even be set out.

8. That may be contrasted with the position where the court has made orders for costs between parties or non-parties in litigation, in which case there is a procedure for reconsideration of assessed costs by a registrar followed by an application for review by a judge: Division 2.17.7 of the Rules. Because of the different path by which the matter came before the Court in the first place, that process was unavailable here: Aulich Civil Law Pty Ltd v Pappas [2022] ACTSC 345 at [6].

9. An appeal of a registrar’s decision does not ordinarily require leave if filed within 5 days of the making of the order being challenged. Here however, for reasons that appear to have been attributable more to the previous representation of the Clients, that did not occur, which meant that the registrar’s orders became subject to the leave of the court: r 5014 of the Rules.

Issues for determination

10. The parties have identified issues for determination. They did not seek that the court conduct the rehearing anew by a line-by-line assessment. That was appropriate given the issues between the parties were broader, or more fundamental.

11. The issues I will deal with are broadly: (a) Whether the costs disclosures pursuant to which work was done, and later invoiced, complied with the requirements of the Act, and in particular ss 269(1)(d), 269(1)(g), 275(1)(a) and 276(1) of the Act (Issue 1). (b) If there was any non-compliance, whether the costs billed should be reduced by an amount considered by the Supreme Court to be proportionate to the seriousness of the failure to disclose, and if so, the quantum of that reduction: s 277(4) of the Act (Issue 2). (c) The quantum of any interest payable pursuant to s 281 of the Act (Issue 3).

12. Although this is an appeal brought by the Clients, the underlying onus remains on the Solicitors to satisfy the court that any costs disclosures or costs agreements issued complied with the requirements of the Act. That is because the Solicitors have the statutory obligation and the necessary professional skill and information in their possession relevant to the assessment (for example, file notes, disbursement costs, knowledge of time taken on tasks such as research into the law). To the extent that there was any uncertainty or a gap arising from a lack of proper records or what was sent and when, that failure is not to be borne by the Clients.

Factual matrix underlying the dispute

13. The Solicitors acted for the Clients in respect of seven matters between February 2011 and June 2014, providing legal services in relation to the following:

Matter Description Commencement of retainer 1. Defamation A potential claim in defamation by Mr February 2011 matter Danthanarayana against the Canberra Times.

2. Defence matter A claim by Mr Danthanarayana against the February 2011 Commonwealth Department of Defence for breach of contract, including a dispute about his security clearance. 3. GR8 matter A claim of approximately $1M by both the 11 March 2011 Clients concerning a building dispute against GR8 Constructions Pty Ltd (GR8), its directors and a building inspector in relation to works carried out at an investment property owned by the Clients in Kingston ACT. 4. Solve matter A claim by both the Clients concerning the 4 April 2011 rectification works that were carried out by Solve Pty Ltd (Solve) at the investment property in Kingston. 5. AB Vincent A claim by the Clients against their former 7 November matter lawyers, AB Vincent Northside Solicitor (AB 2011 Vincent), who acted for them in respect of the GR8 matter, in relation to their costs. The dispute was resolved without recourse to external decision-making processes. 6. Riteway A claim by the Clients against Riteway April 2012 Curtains Curtains in the ACT Civil and Administrative Tribunal concerning interior furnishings for the investment property at Kingston which were said to be defective. This was resolved at mediation. 7. Bankruptcy Bankruptcy proceedings commenced in the August 2012 proceedings Federal Court by Solve Pty Ltd against the Clients, in respect of non-payment of progress payments.

3. The Defamation matter, the Defence matter, the AB Vincent matter and the Bankruptcy proceedings are all context for the invoices that were disputed. However, the focus of the appeal is upon the estimates for the GR8, Solve and Riteway Curtains matters.

The Invoices that were the subject of assessment

15. The Solicitors’ unassessed costs were $161,007.83, which was a total of the following invoices:

Invoice Date Issued Amount Matter/s Reduction on Number covered in assessment invoice

45216 4 Oct 2012 $61,206.92 GR8 $9,142.88 ($55,753.08 owing) AB Vincent 47444 11 Dec 2013 $21,601.85 GR8 $2,669.71 ($21,487.54 owing) AB Vincent 47888 13 Mar 2014 $982.88 GR8 $0.00 47430 13 Mar 2014 $77,216.18 Solve $9,835.55 ($67,898.21 owing) Riteway TOTAL $161,007.83 Assessed amount ($146,121.71 owing) owing $124,473.57

16. That amount was reduced on assessment by $21,648.14 (approximately 15%) to $124,473.57. Counsel’s fees were $65,648.00 and were not reduced on assessment.

17. Further, there was a payment made by the Solicitors of $30,000 towards outstanding counsel’s fees. The Solicitors then sought to recover the $30,000 paid from the Clients as part of the assessment. Although initially there was a challenge to this payment because of a lack of a costs agreement between the Counsel and the Solicitors and some uncertainty about whether the payment made by the Solicitors came from trust monies initially paid by the Clients, because of the terms on which leave was granted, that matter was not part of the appeal.

18. There were also a number of other invoices issued that were not the subject of assessment, apparently because they had already been paid. I will return to that in the course of identifying the applicable legislative provisions.

19. Counsel’s fees were not the subject of any appeal in this court, leave having been previously refused on 26 April 2023 for reasons given orally at the time.

Applicable legislation

20. The relationship between legal practitioners and their clients is carefully regulated. As Bellew J said in respect of legislation dealing with similar disclosure obligations of legal practitioners in NSW, the Act is “directed towards the efficient, effective, targeted and proportionate regulation of the legal profession”: Bevan v Bingham [2023] NSWSC 19; 111 NSWLR 7 at [68]. Of the numerous statutory obligations imposed on legal practitioners, the concern here is a solicitor’s disclosure obligations regarding cost estimates and updating those estimates as matters develop, as well as the consequences for failing to update the initial estimates. The objective behind this part of the regulation is the protection of consumers of the services of the legal profession: s 6(a) of the Act. Compliance with the statutory regime for disclosure is about providing information to people about the costs of legal services. In doing so, it empowers the consumer to make an informed choice about the legal services that they might access, and the costs involved. The court’s evaluation of what are fair and reasonable legal costs is informed by that broader legislative goal.

Disclosure obligations

21. Relevant to the issues here, law practices are required to disclose, in clear plain language (s 275(1)(a) of the Act): (a) an estimate of the total legal costs, if reasonably practicable; or (b) if it is not reasonably practicable to provide such an estimate, to instead estimate a range of the total legal costs and an explanation of the major variables that will affect the working out of the costs: s 269(1)(d) of the Act. (c) If the matter is a litigious matter, an estimate of: i. the range of costs that may be recovered if the client is successful in the litigation; and ii. the range of costs the client may be ordered to pay if the client is unsuccessful (s 269(1)(g) of the Act).

22. While the Act does not spell it out in terms, it is necessarily implicit in the obligation to provide an estimate that such an estimate must be genuine. It must be “the product of actual consideration by the solicitor of the likely costs in the case, having regard to the particular features of the case in question as they then appear”: Crosby v Fica (no 4) [2018] NSWSC 632 at [19].

23. Law practices also have updating obligations, in that they must tell the client in writing of any substantial change to anything statutorily required to be included in a disclosure as soon as is reasonably practicable after the practice becomes aware of the change: s 276(1) of the Act.

24. They also have a separate disclosure obligation under s 270 if another law practice is to be retained, such as when a solicitor engages counsel.

25. Among the circumstances where disclosure is not required (see s 272 of the Act), the following are included: (a) the client is a “sophisticated client” under the Act (defined in s 261 of the Act). This includes another law practice or public company and a number of categories listed under ss 272(1)(c) or 272(1)(d) of the Act, none of which applied to the Clients here; and (b) the law practice has issued a costs disclosure in the previous 12 months, and the client has agreed in writing to waive the right to disclosure, and a principal of the law practice decides on reasonable grounds that, having regard to the nature of the previous disclosures and the relevant circumstances, the further disclosure is not justified: s 272(1)(b) of the Act.

When must disclosure be made?

26. This is material for the circumstances of the assessment, where there were many disputes with different entities. The disclosure must be made every time the same client instructs the law practice on a different matter. The reasons for that are set out in Grass v Bradley Allen Love Lawyers [2015] FCCA 2422; 300 FLR 234 at [33]-[36] (citations omitted, emphasis in original): 33. Subsection 269(1) of the LP Act does not identify the circumstances in which a law practice must make the disclosures required by that subsection, or by when the disclosures must be made. That must be determined from other provisions of the LP Act. Relevant is s.263 of the LP Act which provides that “[t]his part applies to a matter if the client first instructs the law practice in relation to the matter in the ACT” (emphasis added). Section 266 of the LP Act provides that a “client first instructs a law practice in relation to a matter in a particular jurisdiction if the law practice first receives instructions from or on behalf of the client in relation to the matter in that jurisdiction, whether in person or by post, telephone, fax, email or other form of communication” (emphasis added). Subsection 271(1) of the LP Act provides that disclosure under s.269 “must be made in writing before, or as soon as practicable after, the law practice is retained in the matter” (emphasis added). 34. Thus, a law practice’s obligation to make the disclosures required by s.269 of the LP Act arises when a client instructs the law practice in relation to “a matter”; and the disclosures must be made in writing as soon as practicable after the law practice is retained “in the matter”. Further, although s.269(1)(d) of the LP Act only refers to a law practice providing an estimate of the “total legal costs”, given that the LP Act imposes on a law practice the obligation to disclose when a client first instructs the law practice on a matter, and the disclosure must be made as soon as practicable after the law practice is retained in the matter, the “total legal costs” that s.269(1)(d) requires the law practice to estimate are the legal costs of “the matter” for which the law practice is retained. 35. The LP Act does not define the word “matter”. One dictionary meaning of “matter” is an “event, circumstance, fact, question, state or course of things, etc., which is or may be an object of consideration or practical concern; a subject, an affair, a business”. In the context of the LP Act a “matter” may be taken to refer to the work that the law practice is retained to undertake. The LP Act contemplates that such work is capable of being described in some meaningful way. Once a matter is described – that is, once the work the law practice is or is to be retained to do is described - the law practice is obliged to estimate the total legal costs of undertaking that work or, where that is not reasonably practicable, to provide a range of estimates of the total legal costs and an explanation of the major variables that will affect the working out of the costs. 36. Given that the obligation imposed on a law practice to disclose the information referred to in s.269 of the LP Act arises when a client instructs a law practice in relation to “a matter”, it follows that the law practice must disclose that information every time the same client instructs the law practice on a different matter. That is to be contrasted with the circumstances to which s.276(1) of the LP Act is directed. That subsection provides that a law practice “must tell the client in writing of any substantial change to anything included in a disclosure under this division as soon as is reasonably practicable after the practice becomes aware of the change”.

27. I respectfully agree with that analysis. In my view, and relevant to the facts of this case, where there is a different cause of action involving a different legal entity and the issue did not form part of the original court proceeding, that is properly to be viewed as a separate matter requiring the issuing of a fresh costs disclosure.

28. However, I accept that it is not always clear cut, and that it may be difficult at times to work out when an issue that arises has become a new matter. Issues that arise in the one proceeding might generally be thought to form part of the same matter, yet something that was at first a little side issue might develop very quickly into a fully blown dispute. In those cases, the ongoing disclosure obligation envisages that the additional work forming part of the same matter may be substantial enough to give rise to a need to revisit the scope of work on which an estimate was already provided and update it.

29. Either way, if the additional instructions mean that the client is likely to incur noticeably more costs than what has been estimated, then either a separate disclosure or an updated estimate is required under the Act. The choice will be a matter for a solicitor’s professional judgment, but the underlying obligation is the same. Consequences of failing to comply with the provision of estimates and updating estimates

30. The key provision for a non-disclosure under consideration in this dispute is s 277(4) of the Act, which is relevantly in the following terms: (4) If a law practice does not disclose to a client … anything required by this division to be disclosed, the amount of the costs may, on an assessment of the relevant legal costs, be reduced by an amount considered by the Supreme Court to be proportionate to the seriousness of the failure to disclose. Costs that may be recovered and considerations on assessment

31. There are three ways in which legal costs may be recovered (s 279 of the Act): (a) pursuant to a costs agreement made in accordance with the requirements of the Act; (b) in accordance with an applicable scale of costs; or (c) according to the fair and reasonable value of the legal services provided.

32. On assessment, the court must consider (s 300(1) of the Act): (a) whether or not it was reasonable to carry out the work to which the legal costs relate; (b) whether or not the work was carried out in a reasonable way; and (c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that either ss 300A or 300B of the Act apply.

33. The court must also consider whether any applicable uplift fee was justifiable in the circumstances (s 300(1)(d) of the Act) but that consideration is inapplicable here.

34. Here, there was a costs agreement. Subject to it being set aside (which is what the Clients seek), s 300A of the Act applies. It is in the following terms: (1) The Supreme Court must assess the amount of any disputed legal costs that are subject to a costs agreement by reference to the provisions of the costs agreement if— (a) a relevant provision of the costs agreement specifies the amount, or a rate or other means of working out the amount, of the costs; and (b) the agreement has not been set aside under section 288 (Setting aside costs agreements); unless the Supreme Court is satisfied— (c) that the agreement does not comply in a material respect with any applicable disclosure requirements of division 3.2.3 (Costs disclosure); or (d) that division 3.2.5 (Costs agreements) prevents the law practice concerned from recovering the amount of the costs; or (e) that the parties otherwise agree. (2) The Supreme Court is not required to initiate an examination of the matters mentioned in subsection (1) (c) and (d).

35. In considering what is a fair and reasonable amount of legal costs, the court may take into account a number of matters listed in s 300(2) of the Act, with the following matters being among them: (a) whether the law practice complied with the Act; (b) any disclosures made; (c) the retainer and whether the work done was within the scope of the retainer; (d) the quality of the work done; (e) the place where, and the circumstances in which the legal services were provided; (f) the time within which the work was required to be done; and (g) any other relevant matter.

36. Other items in the list pertaining to the skills of the law practice or legal practitioner responsible for the matter do not arise here.

The making and setting aside of costs agreements

37. Material to the circumstances before the court, a costs agreement may be made between a client and their solicitors, but it must be evidenced in writing and must clearly state that it is an offer to enter into a costs agreement, that it can be accepted in writing or by other conduct and the kind of conduct that will constitute acceptance: s 282 of the Act. An example of conduct that may constitute acceptance is the continuing to provide instructions to act after receipt of the costs agreement.

38. Conditional costs agreements (agreements conditional on the successful outcome of the matter to which the costs relate) may be made: s 283 of the Act. That type of agreement was not made here.

39. A costs agreement cannot contract out of a costs assessment and any attempts to do so will render the agreement void: s 282(5) and 287(1) of the Act. An exception to that has been created for sophisticated clients: s 304A of the Act.

40. A costs agreement may be set aside in whole or in part if satisfied that the agreement or a provision of it is not fair or reasonable: s 288(1). In making that assessment, the court may have regard to numerous matters set out in s 288(3) of the Act, the material matters being here: (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 practice; (b) … (c) Whether the law practice failed to make any of the disclosures required under division 3.2.3 (Costs disclosure); (d) The circumstances and conduct of the parties before and when the agreement was made; (e) … (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; (h) any other relevant matter.

41. Where the court orders that a costs agreement or a provision of a costs agreement is to be set aside, then the assessment undertaken continues in accordance with ss 288(5) and 288(6): (5) If the Supreme Court orders that a costs agreement or a provision of a costs agreement be set aside, it may make an order in relation to the payment of legal costs the subject of the agreement or the provision of the agreement. (6) In making an order under subsection (5), the Supreme Court must decide the fair and reasonable legal costs in relation to the work to which the agreement or the provision of the agreement related, taking into account— (a) the seriousness of the conduct of the law practice or any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf; and (b) whether or not it was reasonable to carry out the work; and (c) whether or not the work was carried out in a reasonable way. Issue 1 – The terms of the Costs Disclosures complied with the Act, but lacked timely updating and a separate disclosure for each matter

42. I have decided that each of the three Costs Disclosures complied with the requirements of the Act because the estimates were genuine estimates, not merely template figures inserted with no consideration to the particular retainer. Accepting the breadth and generality of the first two disclosures made, that generality was a product of the circumstances known to the Solicitors at the time.

43. I have also found that the costs estimates should have been updated sooner than the updating estimates that were provided, because the two primary matters in which the Solicitors were representing the Clients had each evolved into vigorously contested disputes with expert evidence and significant counsel involvement required. Further, there were instances where no separate costs disclosure was provided for a new matter. However, those failures were not so material that the costs agreement that was ultimately signed by the Clients in 2013 should be set aside entirely.

44. The reductions that have been made are what I consider to be the fair and reasonable amount of legal costs payable for the work carried out, with the discount being proportionate to the impact of the failures.

45. There was no evidence to suggest that the work which was done was not reasonably required or was not carried out in a reasonable way. The key concern for the Clients is that they were not properly informed of how much the legal work done by the solicitors and counsel involved in the matters may end up costing. I have therefore addressed what disclosures were made to the Clients, and the timing of those estimates.

Costs Disclosures Issued

46. In purported compliance with s 262 of the Act, three costs disclosures were issued in respect of the above matters: (a) 9 March 2011 (2011 Disclosure); (b) 16 January 2012 (January 2012 Disclosure); and (c) 12 December 2012 (December 2012 Disclosure).

47. Relevant to the issues in dispute, each disclosure included the hourly rates for the various solicitors and the disbursement charges. The aspects of disclosure causing the controversy are the estimates that were provided. For each disclosure, the Solicitors stated that it was not reasonably practicable to provide an accurate estimate of the total legal costs. Instead, a range of estimates was provided. Each disclosure also allowed for interest to be charged on unpaid costs, at the rate prescribed under Schedule 2, Part 2.2, Table 2.3 of the Rules.

2011 Disclosure

48. The relevant part of the 2011 Disclosure was as follows (bolding in original): 2.2 Estimate of Costs The following estimate is based on the information available to us as the time of this disclosure. It is an estimate, not a quotation and subject to change. 2.2.1 It is not reasonably practicable at this time to provide an accurate estimate of the total legal costs. Instead a range of estimates is provided inclusive of GST. Preparation and investigation $3,000-$5,000 Interlocutory applications $20,000-$50,000 Mediation & Settlement $20,000 Preparation and Hearing $50,000-$100,000 These estimates are made on the information available to us at this time. They may, and probably will, change when more information is available to us. Some of the major variables which will affect the estimates could be: 1. The number of times you seek our advice. 2. The amount of drafting we undertake. 3. The extent of our dealings with the adversary.

49. The costs disclosure then dealt with costs in court proceedings, what costs might be recovered from the other party and if unsuccessful, estimates of costs that the Clients might be ordered to pay. If the matter proceeded to a three-day hearing, the Solicitors estimated that a maximum of $125,000 might be recovered (if successful) or paid (if unsuccessful).

50. The 2011 Disclosure was issued along with a costs agreement in respect of the GR8 matter. Although that is not specified on the disclosure, it was sent to the Clients by email, with the subject line “Building Dispute with GR8 Constructions” and the contents of the email made it clear that the disclosure statement was “in relation to your building dispute matter”.

51. The Clients were critical of this disclosure because there was no explanation in the document as to why an estimate of total legal costs was not reasonably practicable. I consider that criticism to be unfounded. There is no statutory requirement that a solicitor explain why an estimate of the total legal may not be reasonably practicable. This disclosure was issued at the very commencement of the engagement. The matter was not a straightforward conveyance or drafting of a will. It was a litigated dispute being taken over on an urgent basis from another firm without the provision of documents to give sufficient history. In that context, the Solicitors could not give any more than a basic estimate. It need hardly be said that litigation is notoriously uncertain.

52. The evidence established that this initial estimate, while general, was based on the nature of the forum in which the proceeding was being conducted and the cost of the steps that were commonly required in litigation of the type being pursued by the Clients. There was criticism of the fact that a template was used, and a suggestion that the costs disclosure was “boilerplate in nature”, without giving due and detailed consideration to formulating a written estimate for the matter in question.

53. The use of a template of itself is unremarkable, and it does not follow from the use of a template that the estimate itself were merely boilerplate figures, provided without any specific reference to the GR8 matter. I do not consider they were generic figures, in part because I have taken into account as relevant context other costs disclosures that were sent, which were in evidence. One was sent shortly before the 2011 Disclosure, in February 2011 in relation to Mr Danthanarayana’s separate engagement of the Solicitors to pursue a claim against the Department of Defence. There was a separate engagement letter, costs disclosure and costs agreement sent in relation to that matter. It had the same stages of a litigated dispute but different estimates at each stage.

54. The Clients submitted that there was no evidence of any explanation to the Clients why the work was divided into the stages set out, or what work was likely to be undertaken in each of the four stages that could account for the estimated fees. However, I do not have any difficulty with the general stages that were itemised at the outset. The Act does not require that the workings out of an estimate to be set out or communicated in the disclosure, just that a (genuine) estimate be provided.

55. The Clients also criticised the lack of any inclusion for counsel’s fees in the estimates. I consider the range of legal costs was broad enough to encompass the potential engagement of counsel to appear at hearing instructed by the Solicitors, even in circumstances where the ultimate cost of that course would become a disbursement rather than a legal cost incurred directly by the Solicitors.

56. Overall, this disclosure at the outset of the Solicitors taking over the matter sufficiently complied with the requirements of the Act.

Dispute with AB Vincent solicitors - failure to issue a separate costs disclosure when additional instructions were received

57. In April 2011, the Clients became engaged in a fee dispute with their former lawyers. They requested a properly itemised bill pursuant to Division 3.2.6 of the Act. This led to correspondence in April and May 2011 and further correspondence in October 2011, before the Solicitors applied for costs assessment in November 2011. That work was viewed by the Solicitors as part of the GR8 dispute and invoiced accordingly as part of the invoices 45216 and 47444. However, I agree with the Clients that it was a separate matter, involving separate instructions against a different party and should have been the subject of either a separate disclosure or an updated disclosure expanding the scope of the work. In that regard, there was a failure to comply with s 269 disclosure obligations, the consequences of which will be discussed below.

January 2012 Disclosure

58. The January 2012 Disclosure was in similar form to the 2011 Disclosure. However, for the estimate of costs the range of estimates provided was as follows: Preparation and investigation $50,000-$100,000 Interlocutory applications $50,000-$200,000 Mediation & Settlement $50,000-$200,000 Preparation and Hearing $50,000-$200,000

59. The estimate able to be recovered (if successful) or paid (if unsuccessful) also increased to $220,000 for a three-day hearing.

60. This disclosure was accompanied by a covering letter, specifically referring to the Building Dispute with GR8 Constructions. The material terms of the covering letter were as follows: Since providing you with a Costs Disclosure Statement in March 2011 the scope of our work has become more extensive due to the complexity of your matter and the detailed and comprehensive nature of your correspondence with us. As such, we enclose, for your attention, a new Costs Disclosure Statement disclosing an updated estimate of our costs.

61. The Solicitors also included a copy of their invoice 44202, for work done from July 2011 to January 2012, in the sum of $28,774.23 (not the subject of assessment).

62. The key concern here is that ten months had passed and the work being done appears to have been more intense and more extensive than that originally envisaged. As the Clients submitted, the Solicitors had ongoing disclosure obligations pursuant to s 276 of the Act.

The subtle explanation for the increase was not a breach of the Act

63. The first complaint was that the covering letter explaining the increase was too vague. It was submitted that failures to provide details and examples prevented the Clients from comprehending what they were doing that was escalating costs and what was required in the future to keep costs in check.

64. I consider the Solicitors’ explanation was manifestly an endeavour to be polite and professional. It told the Clients that their detailed and comprehensive correspondence with the Solicitors was one of the reasons for the increased estimates in costs. The other was the increased complexity of the matter. Whether that was because the law or the factual matrix was more complex than first anticipated or because the parties were taking every point (which they were each entitled to do but that course sounds in increased costs) is not significant for the purpose of assessing compliance with statutory obligations.

65. The language used by the solicitors was not as blunt as saying to the Clients that their frequent level of contact and the combative attitude of the parties was causing costs to blow out but that was still the import of what was communicated. In the witness box, the legal practitioner with carriage of the matter at the time was more forthcoming. He said that both the Defence matter and the GR8 proceeding were very hotly contested. He had been a lawyer for 20 years and he had not been involved in more hotly contested litigation than that which involved the Clients. The fact that this was not put in the same terms to the Clients at the time is not conduct that failed to comply with the Solicitors’ disclosure obligations under the Act.

The delay in updating was not beyond what would be considered “reasonably practicable”

66. The evidence given by the legal practitioner was that it became clear to him in the period towards the end of 2011 that the dispute was not going to be resolved within the estimates that had been given in March 2011. He did not accept that the increase in the costs estimate from $200,000 to $700,000 was apparent by mid-2011 and I accept that evidence because the costs that had been incurred in the matter since March 2011 and specifically over the 6 months up to January 2012 were still relatively modest.

67. I accept that the engagement of counsel in May 2011 was a substantial change and required an update. There was some correspondence from the Solicitors to the Clients confirming that counsel’s fees had not been within the original estimates provided. The Clients were told to please let the firm know if they wanted an estimate for counsel’s fees. That was troubling because the legal practitioners had obligations under the Act to provide the estimate, whether the Clients wanted it or not. However, it appears that counsel then gave a separate estimate directly to the client. In any event, counsel’s fees over that period were still only $17,160, with a further $7,832 invoiced at the end of February 2012, which was within the bounds of the initial estimate that envisaged the work to have been performed by the Solicitors. I have passed over this because counsel’s fees were not the subject of the appeal.

68. Under cross-examination, the legal practitioner with carriage of the matter accepted that the estimate should have been provided some months before January 2012, and he agreed he had a concern that by the nature of the Clients’ instructions on the matter, there were likely to be disputes about interlocutory matters and other things that he would not have foreseen at the outset of the matter. His candour in the witness box also reflected the reality of legal practice, in that what he said he required was proper time to review and consider the revised estimate, which he only really got through the court shutdown period over the December/January break.

69. I accept that evidence. In hindsight, it would have been preferable to take stock in around August - October 2011 of where the matter was heading and to sit the clients down and discuss expectations and estimates and provide the increased anticipated costs in writing. However, the fact that this occurred a little later than may have been desirable does not mean that the solicitor fell short of his obligations under the Act. In short, what occurred was not ideal, but the delay does not amount to a breach of the Act in the circumstances of what was occurring at the time. The work being performed was still within the estimate that had been provided; it was just that what was to come in the year ahead was a very significant increase from the work envisaged as being required at the outset of the Solicitors’ receipt of instructions.

The estimate was not generic

70. There was a further criticism raised along the same lines as the complaint made of the 2011 Disclosure, which was that it was generic or boilerplate. Part of the foundation for that submission was the fact that when the 2012 Disclosure was issued, the Solicitors also updated their estimate in respect of the Defence matter. The same reasons were given for the updated disclosure, and the same estimates were given. The Clients submitted that given these matters were completely different, it was improbable that identical costs disclosure ranges applied in both matters.

71. The oral evidence from the legal practitioner was informative on this aspect. He stated on oath that he based the estimates for each of those matters on how matters were generally being managed by the Federal Court at the time, with one interventionist judge imposing timetables and dealing with interlocutory disputes on a monthly basis. As a result, while the subject matter of each of those matters was different, they were each anticipated to be fully contested hearings in the Federal Court with similar hearing estimates and timelines for preparing for final hearing. I accept that evidence as both credible and reliable, coming from an experienced member of the profession.

72. The other part of the foundation for the submission was that the range for each of the stages was so wide as to call into question whether the estimate was genuine at all. I find that the estimates were genuine because: (a) The evidence given by the legal practitioner was to the effect that the wide range was based on his experience. (b) The range included taking the matter to trial. Part of the information then known to the Solicitors included what would be required if they could not resolve the dispute at mediation. The need to prepare a Scott Schedule and expert evidence are examples of big-ticket items that might not be required for mediation but would almost certainly be required for trial and why there was necessarily a broad range in this case. (c) The Solicitors were also treating a number of issues that were escalating as forming part of that costs estimate for the GR8 umbrella proceeding.

73. Although I have accepted that the estimates were not so broad as to no longer constitute genuine estimates or to be non-compliant estimates, I do not wish that finding to lend any encouragement to the provision of a broad estimate with no written explanation. The Act only permits estimated ranges to be provided on the condition that the major variables that will affect the working out of the costs are explained: s 269(d) of the Act. None of the variables particular to the conduct of the proceeding such as the extent of discovery, expert evidence, the extent of counsel’s involvement or the preparation of Scott Schedules were explained. That is the real vice here, not that the estimate was broad, but that the variables were themselves so general as to be meaningless and apt to cause confusion (such as whether they included the solicitors doing the appearance work, rather than counsel, and whether disbursements for expert fees were included as part of the range estimated).

Conclusion on the January 2012 Disclosure

74. Viewing all this cumulatively, I am not persuaded that any delay in updating the estimates was so egregious as to mean that the Solicitors failed to comply with s 276 of the Act, nor that the estimates that were somewhat belatedly given by the January 2012 Disclosure breached the requirements of the Act, because I have found that genuine estimates, which were broken down into stages, were provided, and the disclosure did explain general variables. However, the absence of meaningful content for variables that were more specific to the matter is relevant to what might be considered fair and reasonable.

The missing disclosures in April and June 2012 and January 2013

75. In April 2012, fresh litigation erupted with Solve, the company that had been engaged to rectify the building defects that were the subject of litigation with GR8. The dispute was over outstanding payments and the work done. Solve lodged an application for adjudication under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) on 12 April 2012.

76. The Solicitors argued that the Solve dispute had been treated by them as part of the GR8 matter because all the issues related to the one investment property in Kingston. That may have been the case initially, when the involvement of Solve was for the purpose of rectifying works under dispute with GR8. However, once an application for adjudication was lodged, it became a separate matter, because it involved a separate legal entity litigating a separate proceeding in a different forum; and from the solicitor’s administrative side, it was treated as such, in that it had a separate file number, was separately invoiced and had a separate trust account ledger. Counsel was also separately engaged in relation to the Solve matter. This is a prime example of the fluidity in litigation that makes complying with statutory obligations for estimates and disclosures rather tricky at times.

77. No costs disclosure was provided for that matter, as required by s 269 of the Act and no costs agreement appears to have been sent at that point.

78. In addition, in January 2013, Solve issued bankruptcy notices against the Clients in respect of their failure to pay the outstanding invoices for the building work completed at the investment property in Kingston and the Solicitors were again engaged to apply to the Federal Court to set aside the bankruptcy notices.

79. Even though it involved the same parties, my view is that this too was really a separate matter because it was an entirely separate proceeding involving a different cause of action. It required a fresh costs disclosure and the failure to issue one was a breach of s 269 of the Act. Had I accepted the view taken by the Solicitors, it nevertheless required a further update as the work required to respond to the issue of bankruptcy notices was plainly not within the original scope of the work that the Solicitors were retained to do in relation to the GR8 building dispute.

80. Further, and contrary to Solicitors’ submissions, the failure to issue costs disclosures when instructions to act in additional disputes with a different company were given is relevant to the costs charged by the Solicitors for the work done. The consequences of those failures will be considered below.

81. Separately, the Clients became involved in a dispute with Riteway Curtains which resulted in an application for adjudication lodged by Riteway for outstanding payments. Again, no separate costs disclosure was issued, and the work was performed by the Solicitors. There was work referable to that matter charged as part of other invoices 45385 and 45995, neither of which are in dispute. While the total amount of the matter exceeded the $1500 threshold that enlivened costs disclosure obligations under the Act, only 2 units of work ($44) are actually the subject of the assessment appeal. December 2012 Disclosure

82. The December 2012 Disclosure contained updated estimates that were considerably more detailed that the previous two disclosures. The following summary is sufficient to provide an understanding of the estimates:

(a) Costs and disbursements billed to date ($222,436.25):

1․ GR8 Constructions matter: $168,456.93.

2․ Solve Projects matters: $53,979.32.

(b) Estimated future costs and disbursements:

1․ Application for a stay (solicitor’s and counsel’s fees): $9,380-$19,660.

2․ GR8 – further pre-reference steps (submissions, Scott Schedule responses for solicitor, junior and senior counsel and expert): $4,170-$10,180.

3․ Solve – further pre-reference steps (reply to Solve’s defence, Scott Schedule responses for solicitor, junior and senior counsel, and expert): $4,800-$12,280.

4․ Steps up to trial for both matters: $105,340-$227,680. This included individual estimates for solicitors and counsels’ fees for directions hearings, preparation of reference bundle, preparation for reference hearing, expert witness fees, preparation for a two-day trial for solicitors, junior and senior counsel, further correspondence and attendances and 1-2 further interlocutory applications.

83. The December 2012 Disclosure included a separate fee estimate for the Defence matter. It is unnecessary to set those updating estimates out as the fees for that matter are not being assessed.

The Solicitors failed to comply with their obligations to update the estimates

84. As the Clients submitted, the December 2012 disclosure provided estimates which included work that had already been carried out, as well as for work to be carried out in the future. That of itself did not constitute a failure to comply with the statutory obligations, but it points to the estimate in December 2012 being long overdue.

85. On the assumption that the Solicitors made about issues arising being part of the GR8 proceeding, the three adjudication applications and subsequent enforcement (bankruptcy) proceeding were each a trigger for updating the estimates. The evidence was that each of these matters were urgent retainers with a requirement for immediate action due to the tight time limits applying to adjudications under security of payment legislation and the issuing of bankruptcy notices. The Act accommodates those circumstances through the obligation being tied to what is reasonably practicable. It does not require immediate priority, but the overwhelming nature of the work cannot excuse updating the Clients entirely.

86. Similarly, courts assessing compliance with ongoing disclosure obligations are not blind to the realities of providing legal services, including the vagaries of litigation with disputes that may bubble away and then erupt, along with the pressures and workloads of busy practices. Here, I accept that some latitude must be given in circumstances where a great deal of urgent work was required to address or defend potentially very severe consequences for demanding clients on a number of different fronts. The difficulty is that the delay in disclosure was not days or weeks but many months.

87. Here, the need for very clear updating disclosures as to the work being done and likely to be required was heightened because of two circumstances: (a) the Solicitors knew that the matter was already travelling well beyond the Clients’ immediate financial resources; and (b) the Solicitors had agreed to defer the issuing of their invoices over this period.

88. The consequence was that the Clients were falling further and further behind with the payment for legal services and the true position as to the legal costs being incurred in addition to the counsels’ fees that were being simultaneously incurred was increasingly unknown. The Solicitors did endeavour to keep the Clients updated as to unpaid invoices and work in progress, but what they did not do was to properly update the Clients on the likely work required for those matters and how much it would cost.

89. Due to the number of substantial changes to the anticipated work between January and December 2012, the delay in providing a revised estimate, in circumstances where no separate costs disclosure had been issued in April 2012 for the dispute with Solve, was such that I consider there was a material failure to comply with s 276(1) of the Act.

90. The Clients raised further concerns about the estimates that were attached to this disclosure. One was that the estimated work rolled up the matters in the one document. I consider it was tolerably clear what matter the estimated work related to, but I agree that they were not clear estimates because the “future work” estimated partially included past work that had already been done. That is revealed by comparing the narrative of the invoices when they were ultimately issued and the Solicitors’ affidavit evidence as to the work carried out by the legal practitioners.

2013 Costs Agreement should be set aside

91. The December 2012 Disclosure was accompanied by a costs agreement that was eventually signed on 25 January 2013 (2013 Costs Agreement), after the opportunity to take legal advice upon it had been given. That included the following work to be done: (i) Advise and act for you in relation to a building dispute with GR8 Constructions Pty Ltd, its directors and Kenyon Hopkins in relation to the property known as … Kingston ACT; (ii) Advise and act for you in relation to a building dispute with Solve Project Management Pty Ltd and its director in relation to the property known as ….Kingston ACT; (iii) Advise and act for you in relation to a costs dispute with your former solicitors, AB Vincent Northside Solicitor; (iv) Advise and act for Wajira Danthanarayana in relation to his dispute with the Department of Defence and various individuals at that Department including in relation to his application for review of a decision not to grant him a security clearance; and (v) Any other work that you instruct us to do from time to time.

92. The Solicitors’ hourly rates were set out. Counsel’s fees were to be estimated separately. The Costs Agreement included “special conditions regarding unpaid accounts”. There were four invoices that were either partly or totally unpaid, totalling $133,885.18.

93. One of the conditions was as follows: By accepting this agreement, you acknowledge that you have been given the opportunity to dispute the reasonableness of the Accounts and to obtain independent legal advice in relation to them. You acknowledge that the charges in those Accounts are fair and reasonable and that you have elected not to exercise your rights to apply for costs assessment pursuant to Division 3.2.7 of the [Act] in respect of the Accounts.

94. One of the Accounts referred to was Inv 45216, which is under assessment.

95. In consideration of that agreement to the foregoing, the Solicitors agreed to defer payment of those accounts on the following basis: (i) We agree to defer full payment of the Accounts until February 2013 and to not charge interest on those Accounts until after 1 March 2013. (ii) We agree to accept monthly instalments of $10,000.00 in reduction of the Accounts from November 2012 until February 2013, with each instalment to be paid prior to the last day of each calendar month. (iii) We agree that in February 2013, we will discuss the Accounts and your circumstances with you in good faith with a view to having the Accounts cleared or secured to our satisfaction. (iv) In February 2013, after discussing the Accounts with you in accordance with the preceding sub-clause, we will elect to either accept full payment of the Accounts or accept real property security satisfactory to us for the unpaid portion of the Accounts and any further accounts we issue. (v) Nothing in the foregoing subclauses excuses you from your obligation to pay our future disbursements, including Counsel’s fees, as and when they arise. You must pay these fees in accordance with the terms of Counsel’s invoices as and when they are issued. (vi) Nothing in this clause 18 affects your right to apply for costs assessment, or our right to charge interest, in relation to any invoices issued after the date on which this agreement is accepted by you. The other provisions of this agreement apply to such invoices.

96. There was then a further special condition creating a charge on the Clients’ real and personal property, as follows: To secure payment of any monies that are or may become owing pursuant to this Costs Agreement (including the Accounts), you hereby charge with due payment of the said amounts all of your present and future right and title in all your real and personal property. You consent to us lodging and registering caveat(s) noting our interests hereunder without challenge by you. You also agree to us registering our interests hereunder on the Personal Property Securities Register. You agree not to, and warrant that no other co-proprietor of your real and personal property will, challenge the registration of any caveat(s) or interests on the Personal Property Securities Register in any way whatsoever. You agree to withhold lodging a “lapsing notice” or any other application via the Land Titles Office or any Court to have any caveat(s) removed, until such time as all monies owing under this Costs Agreement have been paid.

97. The Act does permit a law practice to take reasonable security from a client for legal costs: s 280. Whether the above constituted reasonable security was not the subject of direct dispute or submissions in these proceedings, so I have passed over it without comment.

98. The Solicitors argued that the 2013 Costs Agreement was the only agreement that governed the assessment, because it was a consolidated costs agreement that overtook the previous costs disclosures. The Solicitors argued that all of the invoices subject to assessment were payable pursuant to the 2013 Costs Agreement. Clause 18 of the Special Conditions incorporated invoice 45216, which was the only invoice of those to be assessed issued prior to the 2013 Costs Agreement.

99. On that premise, the Solicitors submitted that because there was no failure by them to disclose the matters required by Div 3.2.3 of the Act in the 2012 December Disclosure and 2013 Costs Agreement, the costs must be assessed by reference to that agreement, and any previous costs disclosure or estimate (or lack thereof) was irrelevant to the invoices under assessment.

100. I reject those arguments because they do not accord with the assessment task required by the Act. The statutory obligation is ongoing (s 276 of the Act), with the objective being to achieve an informed consumer at all material times. The legislative objective requires timely and informative estimates at the time the work is to be carried out. The provision of an estimate allows a client to make decisions early as to whether to proceed with the work at all, or how to proceed, and what to do to manage the cost of the proceeding. It is of little use to provide a costs agreement with the estimates of expert and counsel fees at the point where an invoice is to be issued, when the matter has already proceeded down a litigated path, with those people already having been engaged and performing work.

101. Here, because the 2013 Costs Agreement was signed well after much of the work had been done, it cannot be said that it governed entirely the assessment of the invoices issued after it (numbers 47444, 47888, and 47430). As the Clients submitted, the 2013 Costs Agreement could not (in the circumstances that existed here) contract out of, or erase, past non-compliances, nor future costs assessment in respect of the work already performed. The earlier costs disclosures thus continue to bear on the assessment in respect of the work that was done prior to the issuance of those disclosures.

102. In any event, I would go further and find that the 2013 Costs Agreement should be set aside under s 288 of the Act because: (a) It was made after the previous material non-compliances identified above. (b) The 2013 Costs Agreement indirectly purported to prevent the existing legal costs to which it related in part from being subject to costs assessment by requiring the clients to “elect” not to pursue assessment for the invoices issued, with the Solicitors refusing to continue acting unless the agreement was signed. To the extent that it excluded assessment of past invoices, it was void under s 287(1) of the Act. (c) The 2013 Costs Agreement also sought to retrospectively capture the work performed by the Solicitors in each of the matters before the issuance of either the December 2012 Disclosure or the 2013 Costs Agreement that was not yet invoiced, in circumstances where such work was tainted by the previous non-compliances.

103. Insofar as there was additional work done after the 2013 Costs Agreement was signed, the Clients relied on other reasons to set aside the agreement, such as misrepresentations that were made in correspondence leading to the cost agreement being executed, such as statements to the effect that the Solicitors had provided continuous disclosure of their costs and provided ongoing estimates. It is unnecessary to address all the other complaints because as I have said, I consider the circumstances of the case to warrant setting the agreement aside and conducting the assessment based on what the Court considers to be fair and reasonable.

Issue 2: The assessment of the invoices on the basis of the fair and reasonable value of the costs results in a further reduction

104. The Clients argued for the application of scale costs. However, I agree with the Solicitors that the scales in Schedule 4 of the Rules and in Schedule 3 the Federal Court Rules 2011 (Cth) are for the assessment or taxation of costs pursuant to orders made against a party in a proceeding (that is, they are procedural rules for assessing a costs liability pursuant to court orders). As discussed above in relation to the nature of the appeal, because the liability under consideration arises under the Act the costs being assessed are not governed by that procedure. Those scales do not apply.

105. The basis of the assessment is what is fair and reasonable under s 300 of the Act, taking into account the s 300(2) considerations. In the reasoning that follows, I have considered the rates for each of the solicitors involved, set out in each of the disclosures, and accepted them as being fair and reasonable rates. There was no complaint on appeal about the actual quality of the work performed.

Invoice 45216

106. Invoice 45216 dealt with work done from 10 January 2012 to 26 September 2012. The total professional fees were $52,917.93 plus GST ($5,291.79), and disbursements of $2,977.20 plus GST ($268.65).

107. There was a failure to issue a separate disclosure in respect of the dispute with AB Vincent and otherwise a failure to update the estimates in a timely manner in respect of the work performed from April 2012. That does not mean that the Solicitors are not entitled to be paid for the fair and reasonable work that they did. A discount of $8,000 from the professional fees is what I consider to be an appropriate reflection of the proportionate seriousness of the non-compliance. The total amount payable is $52,406.92 made up as follows: (a) Professional Fees: $49,409.72 (comprised of $44,917.93 plus GST of $4,491.79). (b) Disbursements: $2,997.20.

108. Credit is to be given for the amount that had been paid, namely $5,453.84. Accordingly, the amount payable is on assessment is $46,952.09.

Invoice 47444

109. Invoice 47444 dealt with work done from 21 September 2012 to 11 December 2013. The total professional fees were $19,614.33 plus GST ($1,961.27) and disbursements of $23.86 plus GST ($2.39). The bulk of the work was completed before the December 2012 Disclosure was issued.

110. A discount of $3,000 from the professional fees is what I consider to be an appropriate reflection of the proportionate seriousness of the non-compliance. The total amount payable is $18,302.01 made up as follows: (a) Professional Fees: $18,275.76 (comprised of $16,614.33 plus GST of $1,661.43). (b) Disbursements: $26.25 inclusive of GST.

111. Credit is to be given for the amount that had been paid namely $114.31. Accordingly, the amount that is payable on assessment is $18,187.70.

Invoice 47888

112. Invoice 47888 dealt with work done from 2 February 2014 to 7 March 2014. All of that work post-dated the December 2012 disclosure. In my view, the fees charged, including the rates were fair and reasonable. No discount will be applied. The amount payable remains $982.88.

Invoice 47430

113. Invoice 47430 dealt with work done in respect of Solve matters from 2 October 2012 to 12 March 2014. Of that, $15,264.96 inclusive of GST was performed prior to the December 2012 Disclosure (and this included 2 units attributable to the Riteway matter).

114. This is where the non-disclosure was most material because the work to be done addressing the disputes with Solve was substantial. Invoices were paid which were not the subject of assessment. However, at least $65,000 worth of work was performed without any clear estimate or disclosure of what the Solve matters were likely to cost to defend. What is fair and reasonable takes into account that broader context.

115. A discount of $10,000 from the professional fees is what I consider to be an appropriate reflection of the proportionate seriousness of the non-compliances. The total amount payable is $66,216.66, made up as follows: (a) Professional Fees: $62,654.96 (comprised of $56,959.05 plus GST of $5,695.91). (b) Disbursements $3,561.70 inclusive of GST.

116. Credit is to be given for the amount previously paid, namely $9,317.97. Accordingly, the total amount that is payable on assessment is $56,898.69.

Conclusion on assessment

117. Those four invoices total $137,908.47 on assessment. Taking into account the reduction in the amounts owing for the previous credits, the total assessed costs are: $123,022.35.

118. That is represented in the following table: Invoice Date Issued Amount Assessed Reduction on Number costs assessment

45216 4 Oct 2012 $61,206.92 $52,406.92 $8,800 ($55,753.08 owing) ($46,953.08 owing) 47444 11 Dec 2013 $21,601.85 $18,302.01 $2,669.71 ($21,487.54 owing) ($18,187.70 owing) 47888 13 Mar 2014 $982.88 $982.88 $0.00 ($982.88 owing) ($982.88 owing) 47430 13 Mar 2014 $77,216.18 $66,216.66 $9,835.55 ($67,898.21 owing) ($56,898.69 owing) TOTAL $161,007.83 $137,908.47 $21,305.26 ($146,121.71 $123,022.35 owing) owing

119. To those amounts must be added the other two components of the certified costs that were not the subject of appeal, namely $41,448 in unpaid counsel’s fees and $30,000 in counsel’s fees paid by the Solicitors. The total assessed costs owing by the Clients are therefore $194,470.35.

120. The same certificate also recorded the assessed costs of Andrew John Greinke in the amount of $11,495 plus interest on unpaid costs of $6,112.67. As stated above, those amounts were also not the subject of appeal. Due to the certificate including the two assessments, it is cleaner for any subsequent enforcement to remake that part of the certificate.

121. Finally, I do not consider the legal costs to be grossly excessive given the work that was undertaken. I record that I have turned my mind to the conduct considerations required under s 303 of the Act. Without in any way seeking to criticise the costs disclosure obligations under the Act which are aimed at protecting the consumer, it must fairly be acknowledged that they can be onerous in complex matters, and they operate on a work environment that is frequently dynamic with a high susceptibility to variations in scope and intensity, particularly in the litigation space.

122. Strict legislative time limits with severe consequences (such as in the case of the bankruptcy legislation and the security of payment legislation here), time pressures applied by opponents, and for that matter tight timetables set by the courts, all make it difficult for practitioners to take the time necessary to ensure that they deal first with the management of their clients’ expectations in writing as to how much work is about to be undertaken before setting about doing the work. That is not to diminish the importance of practitioners complying with statutory obligations; it is instead to say that with an appreciation of those realities, not every mistake, delay or failure under the Act is a matter touching upon professional conduct. Notwithstanding that non-compliance has been found, I do not consider that any matter is raised on the evidence before the court which would entitle or warrant a referral for consideration here.

Issue 3: Interest is payable on the unpaid costs from the date of assessment

123. Under the Act, there are a number of different ways in which interest on unpaid legal costs may arise resulting in different dates from which interest may be charged.

124. The first way is pursuant to a bill for the legal fees being issued: s 281 of the Act. If a bill is issued and remains unpaid for more than 30 days, then, subject to certain conditions being met, the law practice may charge interest from the day after the bill was issued: s 281(1) of the Act. Under s 281(3) of the Act, the conditions for interest to be charged in that way are that: (a) the bill must state that interest is payable on unpaid costs; (b) the bill must also state the rate of interest; and (c) the interest rate must not exceed that prescribed by regulation or the post judgment rate prescribed by the Rules.

125. The second way is pursuant to a costs agreement: s 281(2) of the Act. Again, the bill issued must state that interest is payable, the rate of interest and that the charge arises under the costs agreement.

126. The third way is through the assessment process. In cases where the legal costs are recoverable according to the fair and reasonable value of the legal services provided (s 279(c) of the Act), interest becomes payable in accordance with the Rules because the assessment process was a proceeding for the recovery of a sum of money. In such a proceeding, the court may order that interest be included in the amount for which judgment is given at the rate considered appropriate, on all or any part of the money and for all or any part of the beginning of the day the cause of action arose and ending on the day before the day judgment is entered: r 1619 of the Rules.

127. It can thus be seen that where legal practitioners have complied with the Act, interest runs from the issuing of the invoice or in accordance with the costs agreement. Any delay in assessment favours the law practice, in terms of the interest accruing during that time. However, where there is a material non-disclosure and the costs agreement is set aside, there is no entitlement to recover any costs until the assessment process has been completed. The debt only becomes due and payable on the assessment. Any delay in assessment favours the client, who does not have to pay interest during that time.

128. In this case, interest is only payable from the time the fees were first assessed (18 October 2022) at the rate applying under the Rules. Regrettably here, that took years for reasons that were partly outside the parties’ control. Interest on $194,470.35 at that rate amounts to the sum of $53,004.36.

Costs of the appeal

129. The Clients have succeeded on appeal. Although ultimately the result is a modest reduction in the primary amount, they have succeeded in reducing the interest payable.

130. Applying the discretionary considerations on costs, my preliminary view is that the usual order should be made, namely that costs should follow the event. The Clients also sought that the costs order made in the assessment on 14 February 2023 also be set aside. That order was not sought as part of the relief contained in the Notice of Appeal. I have had regard to the costs orders made, which were as follows: The respondents pay the applicants’ costs of the costs assessment, to be assessed: (a) until 28 July 2020, on a party and party basis; and (b) from 29 July 2020, on a solicitor and client basis.

131. This suggests that there may be matters outside the court’s knowledge that bear upon the question of the appropriate order for costs (both on initial assessment and on appeal) and it may be that affidavits relevant to costs should be properly before the court on appeal. Given the informal way in which the order dealing with the costs of the assessment was sought, the parties will be given the opportunity to be heard on this issue.

Orders

132. For the above reasons, the Court makes the following orders: (1) The appeal is allowed. (2) The Certificate of Costs Assessment of the court dated 21 October 2022 is set aside and in lieu thereof the Court assesses the costs as follows: (i) The bills of costs of Karen Narelle Fogarty and James Charles McNair Ronald, being the first applicants in the proceeding, be allowed in the amount of $194,470.35 plus interest in the sum of $53,004.36. (ii) The bills of costs of Andrew John Greinke, the second applicant in the proceeding, be allowed in the amount of $11,495 plus interest in the sum of $6,112.67 plus any further interest payable pursuant to r 1620 of the Rules. (3) Within 14 days of the making of these orders, the parties are to provide to the court proposed short minutes of order and to file and serve any submissions and evidence on the question of costs. (4) Any reply submissions are to be filed and served within 21 days of the making of these orders. (5) The question of costs is to be determined on the papers.

I certify that the preceding one hundred and thirty-two [132] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice McWilliam. Associate: Date: