LM -v- K LAWYERS [2015] WASC 244 (13 July 2015)

4 These reasons are delivered in order to make clear the principles upon which I have assessed the bills.

5 It is also unusual that I refer to parties by their initials only. That is not done out of any deference to the sensitivity of the practitioner. Nor would the use in these reasons of the full names of parties to proceedings under the Family Law Act 1975 (Cth) offend s 121 of that Act. It is rather to avoid gratuitous exposure of details of those proceedings. It is also because, for the purpose of these reasons, I am prepared to proceed on the basis of assumptions about the conduct of Mrs M and her lawyers in the Family Court proceedings. Neither is a party to these proceedings and they have not had an opportunity to contest views adverse to them. It would not be appropriate to name them in those circumstances.

6 As noted above, Mr K ceased acting for Mr M in April 2010. The proceedings in the Family Court had then been under way for some 17 months. They involved contests both as to parenting issues (there was one child of the marriage), spousal maintenance, and alteration of property interests. By the time the proceedings reached trial in November 2010, both parties had changed lawyers. The change of lawyers by the wife may have been more formal than substantial: it appears the solicitor responsible moved from one firm to another, taking the file with her. Counsel remained unchanged. The trial took place over five days and on 24 December 2010 the trial judge delivered reasons published as [2010] FCWA 136.

7 The dispute about parenting issues was settled during the course of the trial and His Honour was able to make consent orders. The dispute so far as it related to alteration of property interests and associated financial matters was not settled and had to be determined.

8 Various observations of the trial judge have a bearing on this assessment. That is because the costs incurred by both parties, but particularly by Mr M when Mr K was acting for him, were the subject of comment.

1. Although the parties have been separated barely two years, they have managed to accumulate legal fees in excess of $1.1 million dollars in a dispute that has occupied a significant body of the Court's time and involved a significant number of interim applications.
2. It was flagged on numerous occasions during the course of the hearing before me that costs was likely to be an issue between the parties.

1. The difficulty that confronts me in this case is the significant amount of legal fees that remain owing by the wife between her current and previous lawyers amounting to approximately $250,000.
2. The legal fees that have been rendered in this account by the husband's previous lawyers and the wife's previous and current lawyers are staggering and totally disproportionate to the pool of assets.

1. During the course of the trial I had cause to mention to counsel that as the previous Judge Manager of this matter I had expressed concerns about the adequacy of the representation previously had by the husband and the cost of such representation. I raised that during the trial as I was concerned that some of the propositions being put to the husband as to his failure to comply with obligations of disclosure, for example, may not have been entirely the fault of the husband and I was concerned that counsel and the wife be made aware at an early stage during the trial that I held that view. Neither party raised any objections to my continuing to hear the matter, however I mention it in these reasons because of the significant concerns I have about the costs that have been charged.

11 His Honour's observations concerning the lack of proportion between costs incurred and the asset pool available need to be understood by reference to that asset pool. His Honour found that the net assets of the parties were approximately $1.8 million [99]. In ultimately deciding the percentage division of property between husband and wife the trial judge used a different figure, as a result of adding back into the pool legal costs they had respectively paid. The nature of this approach and the reasons for it are explained in such decisions as Chorn and Hopkins [2004] FamCA 633; (2004) FLC 93-204 and Harrington and Harrington (2007) FLC 92-317.

12 It is not uncommon for judges to complain that the costs incurred by the parties are excessive or disproportionate. While such observations in a particular case must be taken seriously, it is also appropriate to observe with the very greatest respect to the judges involved that judges do not always know why costs are so high.

13 The legal costs a litigant incurs may be aggravated by a number of factors. Those that might be relevant here include:

1. The client may be needy, untrustful, unusually demanding, or simply unreasonable.
2. The other party to the litigation may behave in a way that is excessively or inappropriately hostile or aggressive or uncooperative.
3. Costs may be inflated because a lawyer is deficient in his legal knowledge and skills, or is inadequately resourced, or he fails to discharge his professional responsibility to act in a way that does not burden his client with avoidable costs. All these allegations are made against Mr K.

14 While the observations made by the trial judge as to the quantum of costs are to be weighed in the balance, in the final analysis I have to make my own judgment of whether Mr K's charges were appropriate.

15 Observations by the trial judge as to the competence of legal representation are to be weighed differently. In my view, they are to be given the greatest respect and should be disregarded only if the practitioner is able to provide some convincing explanation of why the Judge was mistaken in that characterisation of the practitioner's conduct.

16 I would make one final observation or explanation about how I have treated the reasons of the trial judge. As indicated above, the trial judge added back in to the notional pool of assets what both parties had spent in legal costs, and then made a percentage distribution of that notional pool. It was 56% in favour of the wife. If as a result of this assessment the practitioner is ordered to pay a substantial sum of money back to the client, then the result might be seen to be a distortion of the proper outcome of the property settlement proceedings and a windfall for this client. That may be so, but in my view it would not be appropriate to take these factors into account. The question before me is what costs were properly chargeable, not how to preserve the intent of the trial judge as to distributions between husband and wife.

17 The amended bill for assessment claims professional fees totalling $330,141.19. Those costs are charged in accordance with a costs agreement dated 27 November 2008. It provides for time charging, at an hourly rate of $270.00 for the practitioner. There was (properly) no objection to the reasonableness of that rate, although there was to its application to work that did not require a lawyer.

18 The supporting evidence of the time claimed is in the form of photocopies of time sheet printouts. Examination of those printouts raises concerns.

19 First, the entries are not wholly sequential. Where what is provided is said to be a contemporaneous record of time spent, that is a matter for concern. The reason has never been explained. The discontinuity of sequence raises questions about the integrity of the record, particularly a concern that there may have been retrospective reconstruction.

20 Secondly, a healthy sampling raises instances of time spent that seems to be excessive, or time charged at professional rates for work of an administrative or clerical nature. Some instances follow. The item numbers in the left column of the table below are those appearing on the bill.

Collecting of documents: 4 units at $120 per hour, $48.

Researched JPs in Ballajura and Canning Vale - 3 units at $270 per hour or $81.

The practitioner seems to be suggesting that he was entitled to charge $81 for finding someone to witness an affidavit. That is not a proper charge.

Settling letter to [wife's lawyers] 17 units at $270 per hour, or $459.

There is nothing preceding those entries to identify drafting of a letter that took 13/4 hours to settle. Again there is nothing in such an entry that gives real support to the charge made.

Delivery of documents (affidavit and Form 2 application): 10 units at $270 per hour.

Travelling to client, pick up, take to JP, wait, sign, drop off client: 14 units at $270 per hour.

That is $378 for providing a taxi service and having an affidavit sworn.

21 The last item is particularly disturbing. It is a claim that the practitioner spent 20 continuous hours on 'research'. There is no indication of what was being researched. Nor, it seems, did this marathon exhaust Mr M. Other work is shown as being done on that day, such that the total charged on this one day is 24.8 hours.

22 The kindest explanation for these extraordinary figures (none was offered by the practitioner) is that the 200 units of research might well be a recording error for 20 units. That would make the time recorded for the day a still very substantial but believable 6.8 hours. However, this explanation was not forthcoming from the practitioner.

23 Nor was 23 February 2010 the only day on which extraordinary time is claimed to have been spent. A table prepared by the client's representative and tendered at assessment without objection shows that there were 20 days in the course of the retainer where Mr K charged for more than 10 hours in a day. On six occasions he charged for 15 or more hours in a day and on three of those days for 20 or more hours.

24 The inevitable conclusion is that Mr K's time records cannot be accepted as uncorroborated evidence even of time spent, let alone whether that time spent was properly chargeable to the client.

25 In the end, in my view it is not necessary or even useful to consider each item on the bill and its accompanying or associated timesheet record. That is for three reasons.

26 First, I find that the practitioner's records of time spent are unreliable.

27 Secondly, this is an assessment of costs, not a linebyline taxation. Previous legislation governing the remuneration of practitioners' charges used the word 'taxation' in relation to the process of adjudicating whether a lawyer's costs were proper. The change in language to 'assessment' must be taken to have been intended and to have denoted a different approach.

28 Thirdly, a microscopically detailed analysis of each line entry would not address the problem. What is put against the practitioner is essentially a complaint of overservicing by ineptitude. It is impossible to determine whether one particular item is properly charged except by reference to the surrounding circumstances and the totality of charges.

29 I have therefore approached the matter on the basis that, although I have conducted extensive sampling of the material provided to me, in the end the proper remuneration is a matter of broad judgment. That judgment has been reached after taking into consideration the evidence directly put in this application by way of affidavit, the submissions made, an examination the of practitioner's files (seven boxes of documents were made available to me for this purpose), and by applying my broad experience both as a taxing officer and before that (although it is now some years ago) as a practitioner, including as an accredited family lawyer.

30 I have identified above three factors that might inflate costs.

31 The first of those is the conduct of the practitioner's client.

32 It appears to me that from the totality of the material before me that Mr M was a demanding client, but not more so than was reasonable in the circumstances. In oral submissions in the course of the assessment, counsel for the practitioner described Mr M as having been a 'concerned, anxious and involved' client. I think that is true but it was only to be expected. Mr M was properly concerned about the welfare and even the physical safety of his young son. There was objective reason to be worried about the consequences of the wife's drug use.

33 Some clients need skilful management. That is part of the skill of a family lawyer.

34 My conclusion on this aspect of the matter is that while Mr M made demands of the practitioner much greater than would be required of a practitioner acting in say, a commercial leasing transaction, his conduct was not such as to increase noticeably the costs he was charged. I am fortified in that conclusion by the trial Judge's generally favourable assessment of Mr M's credibility and character. What did increase the costs, in my view, was the inability of the practitioner adequately to manage Mr M's demands. One example of that is given above, being the episode on 9 May 2009 of the practitioner driving to the client to pick him up to have an affidavit sworn. Other examples are given below.

35 The next matter to consider is whether the conduct of the other party in the litigation increased costs. I think there is no doubt that this is so. The files show that the wife's conduct was erratic. She made frequent and often unreasonable demands in relation to interlocutory matters such as interim spousal maintenance. Maintaining what should have been a stable routine for the wife to be drug tested and the husband to pay for those tests was subverted by her erratic behaviour. The conduct of her lawyers also showed no inclination to try to resolve disputes between the parties by any but the most confrontational and litigious methods.

36 I find that the conduct of the wife and her lawyers significantly increased the costs properly chargeable to Mr M for the work done by the practitioner in discharge of his retainer.

37 That brings me to the third of the possible causes of costs inflation that I suggested above: that is, that Mr K charged too much because he did not know what he was doing.

38 I find that the costs Mr K charged were substantially more than was reasonable or proper, for a number of reasons.

39 The instructions that Mr M gave were in relation to a complex and serious family law dispute. They demanded both expertise and resources to deal with them properly. Mr K is not an accredited family law specialist. He is a sole practitioner with (so far as it appears) little or no secretarial or administrative support. In my view, he should not have accepted instructions to act for Mr M at all. If he did, it should have been only on the basis that he would engage specialist counsel to provide him with the expertise he lacked. It was that lack of expertise that was the reason for repeated judicial criticism of Mr K in the course of the proceedings. That Mr K did not reflect on and consider his position as a result of those criticisms reflects poorly on him.

1. Very early in the proceeding, Mr K filed an affidavit he had himself sworn, that annexed a number of character references for the client (document 16 in Court Documents File 1). The admissibility and purpose of such evidence is obscure.
2. The practitioner prepared and had the client swear an affidavit sworn on 3 February 2009 (document 15 in Court Documents File 1). It referred to allegations that the wife's drug dependency made her unstable and unable to care for the child. It also dealt with the question of whether the wife had acquired a sexually transmitted disease and if so, from what source. The affidavit attached a copy of a report from a doctor treating the wife. That was clearly hearsay. The report said that the wife had consulted her in relation to this matter 'because she found out her husband was unfaithful'. The husband's affidavit denied that allegation and went on to depose:

I believe [V] may have acquired this infection from the drug dealer that I believe she is associating with.

Reviewing the files shows that both sides had descended to this level. There was much annexing by both parties to affidavits of medical reports that reported one party's allegations against the other.

1. Without repeating the contents, I can refer to a chain of correspondence between the practitioner and the solicitors for the wife between 8 March 2010 and 19 March 2010 as a result of the inadvertent disclosure by the wife's solicitors to a proposed single expert of material that should not have gone to the expert. When challenged over this, the response of the wife's solicitors was in my view appropriate and professional. The practitioner's approach on the other hand was characterised by a failure to read properly the court orders in question, a failure to attend to the rules of court applicable, and an entirely inappropriate threat to refer the wife's solicitor to the Legal Practitioners Complaints Committee.
2. On 8 April 2010 the practitioner sent the client a fax about a proposed interlocutory application. It included this paragraph:
   1. At the end of the day, if we put up a good fight and lose, the Court will recognise how strongly you feel about the matter, but will realise it was difficult for you to get proof.

Words fail. That observation shows in my view that the practitioner's identification with his client's cause had overwhelmed both his professional objectivity and his understanding of the proper performance of his duties to the Court.

1. On 31 March 2010 the practitioner sent a fax to the client that included the following:

Now even if she shows a clear drug test, as the last one was, this behaviour by her is not normal and something must be causing it, we think drugs. That's what I researched and sent you information on regarding codeine.

The 'research' was a printout from an internet news report and a twopage printout from an unidentifiable website describing in general terms some of the undesirable sideeffects of drugs such as codeine.

1. A letter from the practitioner addressed to the Associate to a Family Court Magistrate enclosed an affidavit (slightly overdue) and inappropriately went on to make lengthy argumentative submissions about how badly the wife was behaving and how this was affecting the husband's health. There was no warrant for those, and the time spent composing them was wasted and not properly chargeable.
2. The husband's affidavit of 20 February 2009 (document 29 in Court Documents File 2), referring to expenses claimed by the wife in her application for spousal maintenance and annexed list of expenses read in part:
   1. ... there are 23 so called expense items in which she says she is responsible for. Of these 7 are business items which she would normally have nothing to do with and she appears to have included these accounts to make her list of expenses greater than they really should be.

41 There are many more examples I could give. The overwhelming conclusion is that a very large part of the practitioner's time that he has charged for was wasted for various reasons. His documents were technically deficient. The distinction between evidence and submission seems to have eluded him. His adoption of his client's mantle interfered with his judgment of what battles to fight and what to concentrate on.

42 I have indicated that the appropriate way to deal with this assessment, having considered the detail of the submissions made, and having considered and reviewed the material available, is to make a broad judgment of the amount that a competent practitioner retained by Mr M would have charged for work done in the period of the retainer and in response to Mr M's instructions.

43 In reaching that judgment I repeat I have taken into account a number of factors. One is that I accept that this was a contentious and difficult matter, particularly as to the parenting issues. The spousal maintenance issues were never going to be straightforward because of the parties' links to a business that was the source of their income. The property settlement issues were not straightforward.

44 Next, I accept that the conduct of the wife aggravated the costs properly chargeable to Mr M. This was never going to be an inexpensive set of proceedings, but the conduct of the wife and her lawyers made it more expensive.

45 However, even allowing for those factors, it is clear that Mr K was out of his depth. He floundered in the task of identifying and presenting relevant evidence. He spent time doing work that was of an administrative or clerical nature or that he simply should not have been involved in at all. The costs he charged must be deeply discounted.

46 Counsel for the party charged has put it on the basis that Mr K should be entitled to only 35% of what he has charged. I think that is much too steep a discount, because of the aggravating factors that I have identified. In my view, a competent and properly resourced practitioner could have done what was needed for no more than $220,000.00, and I assess the professional costs (excluding disbursements) in that amount. That gives Mr K roughly two-thirds of what he claimed, and I think that properly reflects wasted or otherwise inappropriate work.