The Plaintiffs apply pursuant to s 350(5) of the Legal Profession Act 2004 (NSW) to extend the time to have their costs assessed.
[3]
Background
In or about July 2014 the Defendants (whom I shall refer to as MBP) were retained by the Plaintiffs to assist in resolving issues that had arisen with a proposed development at Turramurra. Broadly speaking, the first Plaintiff (GDI) had a contract to purchase a number of properties on the Pacific Highway at Turramurra from individual vendors. Issues arose in relation to GDI's decision not to novate the contract to a company called New Galaxy Investments Pty Ltd and a subsequent decision by GDI to novate it to a special purpose company to be controlled by a Mr Victor Fong.
In August 2014 the vendors commenced proceedings in this Court naming GDI as the first defendant. The proceedings were heard by Sackar J commencing on 9 March 2015 and taking place on a large number of days through to June 2015. His Honour gave judgment on 21 August 2015: David Alan Thomson v Golden Destiny Investments Pty Limited [2015] NSWSC 1176. Thereafter, argument about costs took place from October to December 2015 and his Honour delivered judgment in relation to costs on 17 December 2015: David Alan Thomson & Ors v Golden Destiny Investments Pty Limited & Ors (No 2) [2015] NSWSC 1929. The proceedings were complex, as is apparent from Sackar J's judgments. They involved a number of parties including three defendants, and there were a number of cross-claims.
On 3 July 2014 MBP gave a costs disclosure. At that time the clients were said to be Louise Lin (aka Yun Lin) and GDI. No complaint was made about this costs disclosure or any subsequent costs disclosure. It is not necessary to set out any part of the costs disclosure except to note that clause 6 of the Terms and Conditions of the costs disclosure relevantly said:
6. Rights, obligations to pay and termination
(a) Legal costs - your right to know. You have the right to:
…
(v) Apply for costs to be assessed within 12 months from the date of the invoice if you are unhappy with our costs.
On 14 July 2014 the costs disclosure was revised and updated to add the other parties who were also to be responsible for MBP's fees. The amended and updated costs disclosure was made to the present six Plaintiffs. The revised costs disclosure also contained clause 6 (above).
During the course of MBP's retainer MBP provided to the Plaintiffs four costs reviews on 14 July, 4 August, 4 September and 24 October 2014. By the time of the final costs review the litigation involved 13 parties.
Tax invoices were sent from time to time during the period of the retainer. The first was dated 30 July 2014 and the final one dated 19 January 2015. Attached to every invoice was the statement required to be attached under the Legal Profession Act. That statement relevantly said:
If you have a dispute with our bill that you have not been able to satisfactorily resolve with our Office Manager, you may:
(1) …
(2) Apply to the Manager, Costs Assessment, for an assessment of the whole or any part of the legal costs, subject to Division 11 of Part 3.2 of the Legal Profession Act 2004. An application made under this section must be made within 12 months after the bill was given or the request was made or after the costs were paid in full (whichever is earlier or earliest). An interim bill may be assessed either at the time of the interim bill or at the time of the final bill.
All of these invoices were paid promptly by the Plaintiffs.
In about mid-January 2015 Mr Peter McCrohon of MBP had a number of conversations with Ms Lin who was the person providing instructions to him on behalf of GDI. Relevantly, she said that she wished to have a Chinese lawyer review and conduct the matter on behalf of GDI. She thought that settlement was more likely to be achieved if that was so. Mr McCrohon was subsequently advised that the matter was to be transferred to Ren Zhou Lawyers who are acting for the Plaintiffs in the present proceedings.
On 9 February 2016 Ren Zhou Lawyers wrote to MBP saying (inter alia):
We refer to the tax invoices you, and counsel, rendered in relation to above matters between July 2014 and January 2015 in the global amount of $461,137.08.
We have reviewed the invoices and are of the view that your firm's invoices and Mr Gor's are excessive, and in some cases (for instance Ms Lin's affidavit) grossly excessive.
We have received instructions to have the costs assessed pursuant to s 198 of the Legal Profession Uniform Law (NSW). We will be applying for a short extension given more than 12 months has elapsed since the bills were rendered.
In the interests of avoiding a lengthy and costly assessment process we are instructed to make an offer that your firm pay to GDI the sum of $200,000 in full and final settlement if (sic) the claims for costs.
The above offer is open for acceptance until COB 23 February 2016 at which time it will lapse and we will commence the assessment process without further notice.
MBP did not reply to that letter.
On 7 June 2016 Ren Zhou Lawyers sent another letter to MBP in these terms:
We are instructed to demand return of $80,000 of the legal fees paid by our client in the above proceedings within 28 days as an alternative of court assessment. Otherwise, we will file the enclosed documents with the Supreme Court of New South Wales without further notice.
MBP did not reply to that letter.
No costs assessment process was commenced. Instead, these proceedings commenced by the filing of a summons on 2 August 2016 seeking an extension of time under s 350(5) of the 2004 Act to have the bills of costs assessed.
[4]
Legislation
Section 350 of the Act relevantly provides:
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.
(2) A third party payer may apply to a costs assessor for an assessment of the whole or any part of legal costs payable by the third party payer.
(3) An application for a costs assessment may be made even if the legal costs have been wholly or partly paid.
(3A) …
(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.
…
Section 334 of the Act provides that the costs the subject of an interim bill may be assessed (inter alia) at the time of the final bill. Accordingly, the time for assessment commenced to run no later than 19 January 2015.
[5]
Reasons for delay
In her affidavit on behalf of the Plaintiffs Ms Lin relevantly said, concerning her reasons for not having commenced the assessment within the 12 month period specified that the Plaintiffs had not been involved in litigation prior to the Thompson proceedings and it occupied greatly her time and that of her husband, Haizhong Cai. She referred also to associated litigation involving a company called Gold Stone Capital Pty Ltd of which GDI is a 95% shareholder. Gold Stone had lent $3.7 million to MV Developments (Lane Cove) Pty Ltd and $2.7 million to MV Developments (Aust) Pty Ltd. On 26 June 2015 both those borrowers had administrators appointed to them and were subsequently placed in liquidation. She said that as a result of the liquidation Gold Stone had been joined as a defendant in proceedings called the Lum Proceedings. She said that Gold Stone was also a supporting creditor in bankruptcy proceedings against Victor Fong who was the sole director of those two companies. Mr Fong was made a bankrupt on 27 June 2016. GDI, although a supporting creditor, did not attend the final hearing.
Ms Lin also said that on about 19 June 2015 consent orders were made in the Thompson proceedings which required the second defendant in those proceedings, MV Golden Destiny Developments (Turramurra) Pty Ltd (MVGDD), to pay $2 million to GDI on settlement of the Turramurra properties on 3 July 2015. Subsequently MVGDD argued that it had overpaid GDI $1 million and commenced proceedings to recover those funds. Those proceedings were settled on 17 February 2016, the day they were due to be heard. In respect of those proceedings Ms Lin said that in December 2015 she was required to give instructions to her lawyers and prepare evidence.
She summarised the reasons for the Plaintiffs' delay in having the Defendant's bills of costs assessed as follows:
(a) The conduct of the Thompson proceedings occupied substantial amounts of time and effort in 2015;
(b) The bills and invoices which the Plaintiff seeks leave to have assessed are in relation to Thompson proceedings;
(c) The Thompson proceedings, at trial, in relation to costs and priorities, were only finalised on 17 December 2015;
(d) The affairs of Gold Stone occupied substantial amounts of time, effort and stress, and continue to do so;
(e) The MVGDD proceedings further occupied the time and effort of the Plaintiff;
(f) One of the directors of the Plaintiff is a Chinese national who was only in Australia for short periods of time in 2015; and
(g) Neither I nor my husband, the other director of the Plaintiff, have ever been involved in litigation prior to the Thompson proceedings.
It was clarified during oral submissions that the reference in (d) above to the affairs of Gold Stone was intended to be a reference to the proceedings in which Gold Stone was involved.
An affidavit from another Plaintiff, Haizhong Cai, Ms Lin's husband, said that Mr Cai had reviewed Ms Lin's affidavit and he agreed with all the matters set out in that affidavit in relation to the reasons why there had been a delay.
[6]
Submissions
The Plaintiffs submitted that although it is not a prerequisite for obtaining an extension of time that an assessment would produce a reduction in the costs, it is a factor which should be taken into account when determining whether it is just and fair to grant an extension of time. Reference was made to Ciaglia v Beilby Poulden Costello Pty Ltd [2010] NSWSC 748 at [26]. The Plaintiffs submitted that there is a real possibility that the Plaintiffs would obtain a not insignificant reduction on any costs assessment. That is because the hours billed totalled 580. On the assumption that Mr McCrohon as partner and Mr Cakic, as associate, each did half the work at the full rates, and using a notional 45 hour working week the result must be that MBP spent more than three months out of the six months period they were retained working on the Plaintiffs' matter full time.
The Plaintiffs submitted that any prejudice must be established by the evidence and that it would be necessary for MBP to establish prejudice notwithstanding the overall onus on the Plaintiffs to show that an extension would be just and fair. In written submissions the Plaintiffs submitted that no prejudice has in fact been demonstrated by MBP although in oral submissions counsel for the Plaintiffs conceded that there was inevitable prejudice to a legal practitioner by the application being out of time. I took that to be a reference to presumptive prejudice which I will discuss presently.
The Plaintiffs pointed to the reasons for the delay in the affidavits. The Plaintiffs also submitted that it is significant that all of the tax invoices were promptly paid by them.
MBP initially submitted that on a proper construction of s 350(5) the Court had no jurisdiction to entertain the present application because it could only be made after a costs assessment had been commenced. On 10 November 2016, the day following the service of MBP's written submissions, the Plaintiffs filed an application to have MBP's bills of costs assessed. On that basis, MBP accepted that the Court has jurisdiction to determine the present application.
MBP submitted that from the outset of the retainer the Plaintiffs were aware of the time limit in which to apply for an assessment. In addition to the costs disclosure, each of the invoices bore a notification of the time limit. MBP submitted that the Plaintiffs do not suggest that they did not know of the relevant time limits and knowledge can be an important factor in the exercise of the discretion.
MBP submitted that there was inadequate explanation for the delay. The preoccupation of Ms Lin and Mr Cai with the Thompson litigation and the other litigation does not constitute a reason why it is just and fair to grant the relief. MBP submitted that the relative commercial sophistication of Ms Lin, who was the person responsible for giving the instructions and dealing with MBP was a relevant matter. MBP submitted that they were prejudiced by the lateness of the application. Finally, MBP submitted that there was no evidence of overcharging.
[7]
Consideration
Before turning to consider the central question of whether it is just and fair for the assessment to be dealt with after the 12 month period it is necessary to say something about an unnecessary distraction introduced into the evidence by Ms Lin. In paragraph 13 of her affidavit she says that her present lawyers informed her when they assumed control of the proceedings in late January 2015 that:
(a) The Defendants had failed to file a defence to a cross-claim brought by another party;
(b) The Defendants had failed to put on evidence going to key issues in the proceedings;
(c) The Defendants had prepared to engage an expert in professional negligence when an expert was not required.
Although no objection was taken to that paragraph it is difficult to see what its relevance is unless it is relied upon as a basis for suggesting that the costs charged by MBP were excessive. It was not suggested in the Plaintiff's submissions that that was so.
It is significant that MBP wrote two letters to Ren Zhou letters after they had been told that the matter was to be transferred to those lawyers. In the first letter of 19 January 2015 Mr McCrohon relevantly said this:
6. As a courtesy to our former client, we will prepare a sufficient summary (at no charge) as to what we contend are immediate matters that initially (and Immediately) need to be attended to including inter alia
(a) Issuing written instructions for the preparation of an expert's report in support of the GDI's Cross Claim;
(b) Preparing and filing further evidence in support of
(i) the amended and expanded cause of action asserted against Geering as pleaded in the Amended Cross Claim filed by GDI late last year; and
(ii) the claim for damages against Geering for the lost opportunity suffered to avoid the current detriment that GDI is suffering as a result of the alleged breach of negligence, breach of contract and breach of fiduciary duties (including the duty to avoid conflict);
(c) Preparing and filing a defence to the recent cross claim (in draft and not yet filed but provided to MBP in late December 2014) by NGI against Louise and her mother and putting on evidence in respect to the extent that it is required.
On 22 January 2015 MBP wrote to the new solicitors saying at the outset:
The purpose of this letter is to facilitate as smooth a transition as possible for GDI in this matter.
The letter then dealt in some detail with the background to the proceedings and the state they had reached. Relevant parts of the letter said this:
Expert Witness
4.1 Counsel has taken the view that it will be necessary for an expert witness to be briefed on questions of professional negligence in the cross claim against Mr Kristjan Geering.
4.2 A Letter of Instruction has been drafted to the proposed expert, Mr Dennis Bluth of HWL Ebsworth. The Letter of Instruction along with a folder of supporting documents had been prepared but not sent to Mr Bluth at the time our services were terminated.
4.3 As a matter of some urgency, we suggest you determine whether or not you wish to brief Mr Bluth or some other expert.
…
Pleadings
5.1 …
5.2 At the last directions hearing (28 November 2014), no orders were made for the filing and service of the cross defendants' amended Defences to the Amended Second Cross-Claim Statement of Cross-Claim. We recommend that the client and you seek orders for the filing of Defences at the next available opportunity and well in advance of trial.
…
7 Further Affidavit Evidence
7.1 In our preparations before the termination of our retainer, we formed the view Louise Lin would be required to serve additional evidence to address various evidentiary holes.
7.2 By way of assistance to your preparations please find enclosed a 72 page factual matrix/chronology.
7.3 We suggest that you pay close attention to the matters highlighted in yellow which concern matters which junior counsel identified as requiring clarification.
7.4 The parts highlighted in green are perceived issues of concern that require clarification for want of consistency, logic or other factors.
7.5 We also suggest that evidence be considered/prepared with respect to questions of the quantum of the client's loss and damage, especially the opportunity cost.
7.6 Counsel has prepared a 60 page interim detailed chronology which is in the papers which deals with further evidential matters including the need for further subpoena / Notices to Produce.
If, as Ms Lin asserts, Ren Zhou Lawyers told her what she has asserted, what they said was without foundation in the light of what is contained in those letters. MBP went beyond what could have been expected of any firm of solicitors whose instructions were withdrawn in the way described.
The following matters inform my consideration of the matter.
First, the Plaintiffs were aware at all times of the requirement to have the costs assessed within a 12 month period. Both the costs disclosure of 3 July 2014 and the updated costs disclosure of 14 July 2014 contained a notation to that effect. So too did each of the invoices sent to the Plaintiffs throughout that year and in January 2015. Neither Ms Lin nor Mr Cai, who were effectively conducting the litigation for themselves and the other Plaintiffs, maintain that they were unaware of the limitation period. Justice Harrison in Harvey v Goodman Law Pty Ltd [2011] NSWSC 340 at [9], [14] and [24] considered that knowledge of an applicant's rights is a relevant consideration. So too is absence of knowledge: Mackowiak v Hagipantelis; Bickhoff v Hagipantelis [2015] NSWSC 1087 at [140] - [142].
Secondly, the person principally responsible for giving instructions, Ms Lin, was a licensed conveyancer. She would therefore have been aware that a client challenging costs under the Conveyancers Licensing Act 2003 (NSW) had a limited time to do so under the Conveyancers Licensing Regulation 2015 (NSW) regulation 12(b). Although she was not strictly a sophisticated client within the meaning of s 312(1)(c) of the Legal Profession Act, her knowledge may be taken to be more informed than most other members of the community who were not lawyers or conveyancers.
Thirdly, the Plaintiffs were, and continue to be, represented by solicitors from the time they left MBP. It is clear that at some point advice was given by the present solicitors in relation to a costs assessment of MBP's invoices. Both Ms Lin and Mr Cai are silent about whether or not they sought or were given advice about applying for an assessment of costs within the 12 month period. Further, although the Plaintiffs' present solicitor swore an affidavit, he said nothing about that matter. Justice Harrison in Harvey at [14] considered that that was a relevant matter to take into account. I agree, particularly because in the present case those solicitors ultimately wrote two letters to MBP seeking repayment of part of the fees paid and threatening to make an application for assessment if agreement was not reached.
Fourthly, the reasons given by Ms Lin, adopted by Mr Cai, do not satisfactorily explain the delay. It may be accepted that the Thompson proceedings and the MVGDD proceedings would have taken some time particularly on Ms Lin's part and also on Mr Cai's part. However, minimal information has been provided about the MVGDD proceedings and also the proceedings involving Gold Stone. As far as the Thompson proceedings are concerned it seems apparent from the hearing dates identified in the judgment of Sackar J that the hearing had substantially concluded by 22 May 2015 and thereafter judgment was given on 21 August 2015. Why attention could not have been given to MBP's legal costs in that three month period was not made clear. Nor does Ms Lin's affidavit identify when it was the MVGDD proceedings commenced nor what work was involved that precluded her or Mr Cai from giving time to the question of the assessment of MBP's costs except in December 2015.
In my opinion, the paucity of the evidence concerning the proceedings which have been identified and how they precluded a consideration of assessing MBP's costs means that the principal reason put forward to explain the delay should be given little weight.
Fifthly, when the Plaintiffs gave their attention to the matter of the assessment of MBP's costs, Ren Zhou wrote a letter on 9 February 2016 giving MBP until 23 February 2016 to respond failing which the assessment process would be commenced. Somewhat discourteously, there was no response from MBP but Ren Zhou then failed to make good their threat to commence the assessment process. Instead, they wrote another letter on 7 June 2016 making a reduced demand and saying that they would institute assessment proceedings within 28 days if no response was received. Again, MBP did not bother replying but no assessment process was commenced within 28 days. Eventually, on 2 August 2016 the present proceedings were commenced. There is no explanation by the Plaintiffs or their lawyers for why nothing was done between 23 February 2016 and 2 August 2016. Even if the date of commencement of the present proceedings is regarded as the relevant one, the application is more than six months out of time.
Sixthly, in Harvey Harrison J at [16] considered it a relevant matter that there was no evidence put forward by the plaintiff in that case that he would not recover the party/party costs which he had obtained in the principal proceedings. In the present case it may be noted that in his judgment of 17 December 2015 Sackar J ordered that GDI was entitled to its costs of the entire proceedings on an indemnity basis. In his oral submissions counsel for Plaintiffs said that as far as the cross-claims were concerned an indemnity costs order was made against one but not the other of two cross-defendants. Nevertheless, and although an appeal has been lodged in the proceedings, as Harrison J said, there is no evidence that GDI's financial position is compromised when it obtained the indemnity costs order that it did. I accept, as counsel for the Plaintiff submitted, that indemnity costs may not, in some cases, mean all of the costs a party is obliged to pay its lawyers.
Seventhly, the Plaintiffs point to what they say is the overcharging demonstrated by the number of hours and months that the two lawyers at MBP must have been working to justify the costs they have charged. They suggest, therefore, that it is likely there will be some reduction on assessment.
In Wong v Watts McCray Lawyers [2015] NSWSC 849 Fagan J said:
[9] On an application such as this, it would not be appropriate for the Court to evaluate the grounds of challenge to items in a bill as if the assessment were being carried out. However, it would be relevant to take into account, if it were the case, evidence that showed manifestly and readily provable overcharging in significant amounts. That might well be a factor in favour of an applicant, relevant to the fairness and justice of extending time. But that is not this case.
Similar remarks were made by Studdert AJ in Dye v Fisher Cartwright Berriman Pty Ltd [2010] NSWSC 895 at [11] and by McCallum J in Ciaglia at [26].
No allegation is made that the charges made by the solicitors were not in accordance with the costs disclosure. Rather, the challenge made to some but not all of the tax invoices is a complaint of excessive charging for the work done. In some cases it is suggested that there is double charging.
There is nothing in the invoices that shows manifest and readily provable overcharging. I am prepared to assume, however, that the Plaintiffs may be successful in obtaining some reduction in the amounts they have paid. I do not, however, consider that this is a determining factor.
Finally, the issue of prejudice to the Defendants must be considered. As Studdert AJ noted in Dye at [13] until amendments to the Act in 2006 s 350(5) required the costs assessor to deal with an application made out of time unless the costs assessor considered that the law practice had established that to do so would in all the circumstances cause unfair prejudice to the law practice. By those amendments the onus has now been shifted to the applicant to demonstrate that it is just and fair to proceed with the assessment having regard to the delay and the reasons for it. Prejudice is, however, still a relevant consideration but the fact that no actual prejudice can be demonstrated does not necessarily result in an application to extend time being successful.
In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 McHugh J, in dealing with extension of time under limitation statutes, spoke (at 555) of the presumptive prejudice to a defendant where an extension of time is granted. That presumptive prejudice involves some or all of the four broad rationales that McHugh J identified (at 552) where he said:
First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even "cruel", to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period.
Certainly, the third and fourth and possibly the second of those matters are relevant on the present application. Further, his Honour made clear that the test stated by the court from which the appeal in that case was brought, that the enquiry was whether an order extending time would make the defendant any worse off than it would have been if the action had been commenced within the limitation period, was a wrong test which downplayed the second, third and fourth rationales identified and gave no weight to the fact that the defendant's potential liability expired at the end of the period and to extend it may result in the imposition of a new legal liability.
In my opinion, these remarks are entirely apposite by analogy to the present situation. I am strengthened in that view by the amendment to sub-section (5) which removed the obligation of a defendant to demonstrate prejudice and, as with most legislative provisions concerning extension of limitation periods, put the onus on the plaintiff to show something in the nature of justice and fairness for an extension to be granted. I note also that counsel for the Plaintiffs conceded that there is some prejudice to MBP in having to deal with an application out of time. The Plaintiffs submitted that such prejudice was outweighed by the fact that if an extension is not granted the Plaintiffs will have no recourse in relation to the fees charged. However, that submission does no more than re-state the issue of justness and fairness in a different way.
The significant matters which tell against the Plaintiffs are (a) the knowledge of Ms Lin of the 12 month period, (b) the absence of a satisfactory explanation for the 12 month period, (c) the absence of any explanation from February to August 2016, and (d) the fact that the Plaintiffs have been legally represented by their present solicitors from the commencement of the 12 month period to August 2016. I am not satisfied that the fact that there is some chance of a reduction in the fees on an assessment nor the absence of actual prejudice, beyond the prejudice conceded, outweighs those matters.
In the circumstances, I do not consider 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.
[8]
Conclusion
I make the following orders:
(1) Dismiss the Amended Summons.
(2) The Plaintiffs should pay the Defendants' costs.
[9]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 23 November 2016