By way of a summons filed on 7 July 2016 in this Court, Messrs Franceso Forgione and Pasquale Forgione (the plaintiffs) seek leave to proceed with an application for costs assessment. Ashurst Australia - A Partnership (the defendant to the summons) resisted the making of the orders sought. The matter came before me in the Duty List yesterday, and I indicated to the parties that I would provide my judgment today.
It was agreed between the parties that the Legal Profession Act 2004 (NSW) (the Act) is the applicable statute, despite its recent repeal. It was also agreed that the central provision calling for my consideration is s 350 of the Act, which is relevantly as follows:
350 Application by client or third party payers for costs assessment
(1) A client may apply to the Manager, Costs Assessment for an assessment of the whole or any part of legal costs.
…
(3) An application for a costs assessment may be made even if the legal costs have been wholly or partly paid.
(3A) If any legal costs have been paid without a bill, the client or third party payer may nevertheless apply for a costs assessment.
(4) An application by a client or third party payer for a costs assessment under this section must be made within 12 months after:
(a) the bill was given or the request for payment was made to the client or third party payer, or
(b) the costs were paid if neither a bill was given nor a request was made.
(5) However, an application that is made out of time, otherwise than by:
(a) a sophisticated client, or
(b) a third party payer who would be a sophisticated client if the third party payer were a client of the law practice concerned,
may be dealt with by the costs assessor if the Supreme Court, on application by the costs assessor or the client or third party payer who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12-month period.
…
(9) In this section:
client includes the following:
(a) an executor or administrator of a client,
(b) a trustee of the estate of a client.
third party payer includes the following:
(a) an executor or administrator of a third party payer,
(b) a trustee of the estate of a third party payer.
Background
The background may be shortly stated.
Some time ago, the plaintiffs were alleged to have been trading whilst insolvent. Mr Franceso Forgione retained the defendant as the solicitors for the plaintiffs in resistance to that claim. By way of a letter of 5 February 2013 to the plaintiffs, the defendant set out, in an orthodox way, the basis of the retainer, and provided an estimate of costs of $55,000. It is noteworthy that the letter of 5 February 2013 contained the following paragraph:
Disputes in relation to our fees or expenses
The following avenues are open to you if there is a dispute in relation to our fees and expenses ("costs") which you are not able to resolve by discussions with us. You may:
1. Apply for an assessment of our costs under Division 11 of Part 3.2 of the Act. Under section 350 of the Act you must apply for an assessment within 12 months after:
(a) the bill was given or a request for payment was made; or
(b) the costs were paid if neither a bill was given nor a request was made.
However a costs assessor may deal with an application after the 12 month period in certain circumstances which are set out in section 350(5) of the Act.
2. Apply to set aside our costs agreement or a provision of our costs agreement under section 328 of the Act.
Thereafter, the defendant did a substantial amount of work on behalf of the plaintiffs. Various invoices were rendered, each of which was paid. It was accepted by the solicitor for the plaintiffs before me that each of those invoices also sets out the rights of the plaintiffs to have costs assessed, pursuant to the provision under consideration.
By way of an email of 9 October 2013 to the plaintiffs, a solicitor within the defendant set out a prediction about costs with regard to the upcoming trial of the allegation, which was listed for hearing in April 2014.
In a further email of 28 February 2014, a solicitor within the defendant adopted the same course, although more detail was provided, and a distinct note of pessimism was sounded with regard to the upcoming hearing.
After that, correspondence began to be exchanged between the plaintiffs and the defendant suggesting a degree of dissatisfaction on the part of the plaintiffs with the legal services for which they had been paying. Eventually a dispute developed, whereby invoices became outstanding. The dispute was seemingly resolved by way of an email exchange of 12 September 2014, in which it was agreed between Mr Franceso Forgione and a partner of the defendant that outstanding invoices would be satisfied if the plaintiffs paid $140,000 to the defendant.
In conformity with that agreement, $80,000 was paid in instalments. It is alleged by the defendant that, contrary to the agreement, $60,000 remains outstanding.
Eventually, in order to obtain that $60,000, the defendant filed a statement of claim on 4 April 2016 in the Local Court at Sydney seeking $60,000 plus interest and other sums. It is noteworthy that that statement of claim does not sue upon the agreement to which I have referred of 12 September 2014. Rather, it sues upon the original costs agreement of 5 February 2013, and submits that various invoices rendered in conformity with that agreement are outstanding.
Issues
Two questions arise for my determination. The first is whether the 12 month period within which the plaintiffs had an unfettered right to seek a costs assessment pursuant to s 350(4) of the Act has expired. That raised the anterior question of when that period commenced.
The second question is, if that period has expired, whether it would nevertheless be "just and fair" for me to grant leave to the plaintiffs to have a costs assessment, pursuant to s 350(5) of the Act.
First issue
With regard to the first question, the solicitor for the plaintiffs submitted before me that the period commenced to run at the time of the last request made for payment of the plaintiffs by the defendant. He conceded that that reading of the sub-section would disadvantage a solicitor who rendered a bill but, finding the bill to be unpaid, subsequently requested that it be paid rather than immediately commencing proceedings. That would be for the simple reason that every request for payment subsequent to the rendering of the invoice would lead to the "clock" being "reset".
I cannot accept that the intention of Parliament expressed by way of the sub-section can be understood as having been that a solicitor should be disadvantaged in that way - that is, by seeking to resolve an unpaid bill by requesting payment - rather than commencing proceedings immediately.
To the contrary, unassisted by authority, I interpret the legislation as being to the effect that the "clock" commences to run either when an invoice for the legal service in question is rendered, or when an informal request to the same effect is made.
It can be seen from the statement of claim of the defendant in the Local Court that the invoices relied upon were rendered on 31 March 2014 and 30 April 2014. Accordingly, the 12 months expired, at the latest, on 30 April 2015.
In accordance with my interpretation of the central provision, the submission of the plaintiffs about the first issue must be rejected.
That determination of mine means that one must consider whether it would be "just and fair" to grant the leave sought (although the section does not speak in terms of leave, that is the way the application was framed and argued, without demur on the part of counsel for the defendant).
Second issue
As for the second issue, the solicitor for the plaintiffs submitted that the defendant had not kept its clients properly informed of the costs that were to be incurred. It was said that there is a marked disjunction between the estimate provided in the costs agreement of 5 February 2013 - that is, approximately $55,000; and the total amount of legal costs said by the defendant to be payable - that is, approximately $235,000 (I combine in that figure sums already paid by the plaintiff and sums said to be outstanding).
It was also submitted that the email of 28 February 2014 came too close to the hearing to permit the plaintiffs to make properly informed decisions about their pending litigation.
Finally, it was said that it was incumbent upon the defendant to inform the plaintiffs of their rights to a greater extent than it did. In particular, it was submitted that the attention of the plaintiffs should have been drawn yet again to their rights under the Act to obtain a costs assessment, once the relationship between solicitor and clients began to sour.
I do not accept those submissions either. I consider that it is tolerably clear that the letter of 5 February 2013 is speaking of costs to advise, and explicitly "carves out" any costs if litigation were to result.
Furthermore, I consider that the two emails to which I have referred were perfectly adequate advices as to the costs that could be incurred by fully defending the allegation, and the distinct possibility of defeat (a prediction that ultimately came to pass).
Finally, I do not accept that the defendant was called upon to provide further information to the plaintiffs than it did about the rights of the plaintiffs to seek recourse elsewhere once the dispute about costs began.
As a separate point, the solicitor for the plaintiffs submitted that I would infer from the timing of the application - that is, after proceedings had been commenced for recovery of the debt in the Local Court, and not before - that the plaintiffs had been ignorant of their rights to seek a costs assessment until that time.
I do not accept that submission either. To the contrary, I think that the submission of counsel for the defendant that this step is merely a delaying tactic, particularly in light of the readiness of the plaintiffs in the past to pay invoices from the defendant, has some force. But on the material placed before me, I do not consider that I can come to a firm determination in that regard; I regard the timing of the application as a neutral factor.
All of that argues powerfully against leave being granted, and against determining the summons in favour of the plaintiffs.
On the other hand, counsel for the defendant accepted that the Local Court proceedings are founded (as I have said) not on the email agreement of September 2014, but on the costs agreement of February 2013. He also accepted that, if the plaintiffs file a defence in the Local Court calling into question the fairness and reasonableness of the costs claimed by the defendant in that jurisdiction (a step foreshadowed, although not yet done), then the learned Magistrate would be called upon to embark upon a highly detailed analysis of the reasonableness or otherwise of the costs claimed by the defendant.
Founded on that concession, I cannot accept that it is appropriate to burden a busy Local Court Magistrate with that task when there is an available alternative whereby an expert costs assessor, highly experienced in such determinations, could undertake the same evaluative task. And that is especially so when the resultant assessment will have the status of a judgment, and therefore will be able to be enforced by the defendant if its contentions are correct.
It is true that adopting that course may occasion some delay to resolution of the claim of the defendant in the Local Court. On the other hand, as a matter of practicality, resolving such a matter in that jurisdiction - the hearing of which may take some days, and (as counsel for the defendant suggested) may call for expert evidence about the reasonableness of the costs - may not be promptly achieved either.
In short, I do not accept that conduct of the defendant calls for the leave claimed being granted to the plaintiffs. Nor am I affirmatively satisfied that the delay was caused by ignorance on the part of the plaintiffs of the availability of the relief sought. I do accept, however, that the most convenient and sensible way to have this dispute about costs resolved is for leave to be granted to the plaintiffs, and for the dispute to be resolved by an expert costs assessor, rather than a busy Magistrate. Accordingly, I propose to grant the leave sought in the summons filed by the plaintiffs.
Finally, in the circumstances I respectfully request that this costs assessment be given as much priority as reasonably practicable.
Costs
As for the question of costs, in the summons it was proposed that each party pay its own costs of these proceedings. Even though the plaintiffs have found success on a disputed application before me, I regard that implicit concession on their behalf as soundly appropriate.
Orders
I make the following orders:
1. The plaintiffs are granted leave to proceed with their Costs Assessment Application No 2016/188189 filed 21 June 2016.
2. Each party must pay its own costs of the proceedings before me. [ORDER 2 VACATED UNTIL 23 SEPTEMBER 2016.]
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Decision last updated: 23 September 2016