Nunzio Berardi v Salvatore Russo t/as Russo & Partners

Supreme Court of NSW|2015-04-01|Before: Rothman J

Judgment

HIS HONOUR: Nunzio Beradi, the plaintiff, appeals against the judgment of Magistrate Pierce in the Local Court delivered on 7 October 2014, in which his Honour held that Mr Beradi was liable to pay the amount claimed by Russo & Partners, the defendant in these proceedings.
In sum, the plaintiff had retained the defendant, and in particular Mr Russo, to represent him in four matters. The defendant issued several bills of costs to the plaintiff, pursuant to three separate but relevantly identical costs agreements. For whatever reason, the plaintiff did not pay those bills. Consequently, the defendant instituted proceedings in the Local Court and successfully obtained an order that the plaintiff pay $45,002.84 in outstanding legal fees, plus interest and costs.

Local Court proceedings and judgment

On 2 April 2014, the defendant filed an Amended Statement of Claim, claiming $45,002.84 as the unpaid amount on the tax invoices issued in relation to the ASIC, Abbottsford, SMS and Trust matters.
On 11 April 2014, the plaintiff filed a defence that pleaded, in essence, that he had not retained the defendant to act for him in any of the matters and had not entered into any of the costs agreements. In the alternative, the plaintiff alleged that each of the costs agreements were "invalid for its failure to meet the requirements of Part 3.2 of the Legal Profession Act 2004".
The defendant wrote to the plaintiff on 29 September 2014 requesting particulars of his defence that the costs agreements failed to comply with the requirements of the Act. The plaintiff responded in a letter of the same date, which stated as follows: "1. The Costs Agreement and Disclosure fails to disclose the entirety of the matters required under the section 309 of the LPA 2004 - In particular the Costs Agreement and Disclosure does not contain the matters required under s309(1)(b)(i), (b)(iv), (g), (h), (i)(ii) and (i)(iii). It is also questionable whether the Costs Agreement and Disclosure meets the requirements of s309(1)(a) and (c).2. There is no evidence of compliance with section 36 during the ASIC proceedings.3. Given the above defects, the commencement of the current claim is in breach of s 317 of the LPA 2004."
On 1 October 2014, the defendant responded to the plaintiff's provision of particulars by stating the following: "It is noted that our Costs Agreement clearly complies with Section 309 and we refer you to paragraphs 3 and 11 in the first instance".
The matter was heard by Magistrate Pierce in the Local Court at the Downing Centre on 7 October 2014. Two affidavits sworn by Mr Russo were admitted into evidence. The first affidavit sworn by Mr Russo annexed the various costs agreements and tax invoices, while the second affidavit annexed the correspondence between the parties regarding particulars. It is these affidavits and annexures that constitute most of the evidence on appeal. Mr Russo was also extensively cross examined by counsel for the plaintiff during the hearing in the Local Court.
An affidavit sworn by the plaintiff was not admitted into evidence as the plaintiff did not attend court and was unavailable for cross examination. As a consequence, the plaintiff did not tender any evidence at first instance.
At the commencement of the hearing in the Local Court, the counsel for the defendant made an application, pursuant to r 14.28 of the Uniform Civil Procedure Rules, to strike out the part of the plaintiff's defence that claimed the costs agreements were invalid for their failure to comply with Part 3.2 of the Act. The counsel for the defendant submitted that such a claim did not disclose a defence. However, after an exchange with the Magistrate, the defendant did not press that application in order for the matter to proceed to a final judgment on all issues.
During the hearing, counsel for the plaintiff made oral submissions concerning the failure of the costs agreements to comply with the requirements in Part 3.2 of the Act, in particular the disclosure obligations in s 309 of that Act. Counsel did not submit that the plaintiff did not enter into the costs agreements with the defendant, notwithstanding the terms of the Defence filed.
Counsel for the defendant handed up written submissions in addition to his oral submissions. After retiring to consider the submissions, the Magistrate found in favour of the defendant on the basis that the plaintiff had not sufficiently pleaded his defence. The key extract of his Honour's judgment is set out below: "First of all, and this is most significant, the non-compliance with s 309 or other provisions of the part were, in my view, not adequately pleaded, and such a failure is fatal…The letter of particulars of 29 September 2014 was too late to remedy the defect, in my view, far too late, and in any case particulars, even in a pleading where they appear typically in a subheading underneath some matter of fact or law which is pleaded, are themselves no the pleading. That would be normally less fatal in this Court than it would in the Supreme Court, but they are not the pleading. Letters of particulars, by definition, are not the pleading either. One may overcome the difficultly in this Court. As I said before, pleadings do not have to be pretty, they do have to put one's opponent on notice adequately of what one says one's case is. In any case, the letter itself is vague and does not sufficiently and precisely identify what matters were required to be complied with."
Having found that the plaintiff succeeded "without more", the Magistrate continued to make some "additional observations" in relation to defendant's compliance with the disclosure obligations under the Act. I shall return to these observations later in this judgment as they relate to the issues on appeal.
Finally, the Magistrate found that the plaintiff was liable to pay to the defendant the amount claimed, in addition to interest and costs.

Nature of appeal

Section 39 of the Local Court Act 2007 provides that a party may appeal a judgment or order of Local Court to the Supreme Court only on a question of law. When an appeal ground involves a question of mixed fact and law, a party must be granted leave to appeal by the Supreme Court, as required by s 40 of the Local Court Act 2007.
The principles concerning what is a question of law have long been the subject of judicial comment. It is unnecessary for me to repeat those principles, beyond noting that it is often very difficult to determine whether a matter involves a question of fact or law, or a question of mixed fact and law. I adopt the approach taken to the determination of what is question of law in Collector of Customs v Pressure Tankers Pty Ltd and Pozzolanic Enterprises Pty Ltd [1993] FCA 322; (1993) 43 FCR 280 (cited with approval in Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389) and Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW).
During the course of the proceedings before me, the plaintiff submitted that the appeal grounds involve questions of law only. However, to the extent that they involve questions of mixed fact and law, the plaintiff seeks leave to appeal.
In my view, the appeal grounds, which are considered in detail below, raise questions of mixed fact and law, because each legal argument necessarily depends on the factual conclusion as to the level, extent and nature of disclosures, which are not agreed between the parties. The issues raised and the submissions upon which the plaintiff relies are sufficient for the grant of leave. Accordingly, to the extent that it is necessary, I grant the plaintiff leave to appeal, except as to the appeal raised by grounds 5 and 6, as identified herein.

Appeal grounds

The plaintiff appeals against the judgment of the Magistrate on 6 separate grounds, which may be summarised as follows: The Magistrate denied the plaintiff procedural fairness by improperly striking out the defence and/or failing to hear the plaintiff in response to the application to strike out the defence before giving a decision on that issue; The Magistrate erred in law by striking out the defence on the grounds that the defence was inadequately pleaded and that the particulars of the defence were provided too late; The Magistrate erred in law by finding that the defendant complied with s 309 of the Act in that they had disclosed: The plaintiff's right to negotiate a costs agreement; The plaintiff's right to be notified of any substantial change to the matters required to be disclosed under s 309; The plaintiff's right to progress reports; This ground was not pursued on appeal; The Magistrate erred in law by finding that the defendant had complied with s 309 of the Act when the defendant failed to disclose, as required under that section, that the law of NSW applied to the legal costs in the matter; and The Magistrate erred in law by failing to apply s 317 of the Act by granting judgment in favour of the defendant before the legal costs had been assessed in accordance with the procedures in the Act.

First and second appeal grounds Submissions

The first and second grounds of appeal both relate to what the plaintiff has termed the Magistrate's striking out of the defence and, accordingly, shall be dealt with together.
In the first ground of appeal, the plaintiff submits that the Magistrate denied him procedural fairness by failing to hear his counsel before striking out part of the defence.
In the second ground of appeal, the plaintiff submits that the Magistrate erred in law by striking out part of the defence. In support of this submission, the plaintiff outlines several factors to demonstrate that, by the time of the hearing, the defendant had chosen to proceed on the basis that the costs agreements complied with the disclosure requirements under the Act and had waived his right to apply to strike out the defence. In particular, the plaintiff states that the defendant did not inform the plaintiff before the hearing that he would seek to strike out the defence; that the defendant had, in his letter dated 1 October 2014, indicated to the plaintiff that he would oppose the defence on the basis that there had been compliance with s 309 the Act; that the nature of the defence did not require any further evidence to be tendered; and that the defendant did not suffer any prejudice as a result of the defence.
The plaintiff further submits that the Magistrate erred in law by striking out part of the defence as that part of the defence was adequately pleaded because, despite being large, Part 3.2 of the Act establishes a disclosure regime that must be followed prior to the recovery of legal fees.
The defendant submits that the Magistrate's decision was not a determination of a strike out application but a determination that the defendant's case succeeded on the basis that the plaintiff had failed to plead his defence. The defendant further submits that the pleadings were "deficient and embarrassing" and that the gaps in the pleadings cannot be filled by the provision of particulars. Consideration
The plaintiff's first and second grounds of appeal are infected by a fundamental misapprehension, namely, that the Magistrate struck out the defence. As stated earlier, at the commencement of the hearing in the court below, the counsel for the defendant made an application to strike out part of the defence, specifically the part that claimed the costs agreements were "invalid for failing to comply with Part 3.2 of the Act". However, after a discussion with the Magistrate, counsel for the defendant withdrew the application for summary dismissal of the defence to allow the matter to proceed to final judgment on all issues.
The plaintiff appears to have misconstrued the nature of the Magistrate's judgment in which his Honour found in favour of the defendant on the basis that the defence was not adequately pleaded. At that stage of the proceedings, the Magistrate was giving a final judgment on all issues raised in the matter. Consequently, the first and second grounds of appeal must fail.
There is also no basis for the plaintiff's submission that he was denied procedural fairness. The application to strike out part of the defence was made by the counsel for the defendant at the commencement of the hearing in the Local Court and therefore put the plaintiff on notice that this was a substantive issue in the matter. Further, counsel for the plaintiff was given the opportunity to make submissions, which he did. Yet in his submissions, counsel for the plaintiff only dealt with the issue that the costs agreements did not comply with the disclosure requirements in s 309 of the Act. The failure by the counsel for the plaintiff to make submissions on the issue of the inadequacy of the defence does not result in a denial of procedural fairness. As Deane J held in Sullivan v Department of Transport (1978) 20 ALR 323 at 343; the common law does not impose upon a court or tribunal the "impossible task of ensuring that a party takes the best advantage of the opportunity to which he is entitled."
Moreover, I agree with the Magistrate that the defence was inadequately pleaded. Pleadings must give "such particulars of any claim, defence or other matters as pleaded by the party as are necessary to enable the opposite party to identify the case that the pleading requires him or her to meet": r 15.1 Uniform Civil Procedural Rules 2005.
As stated on several occasions, the defence alleged that the costs agreement was "invalid for failure to meet the requirements of Part 3.2 of the Legal Profession Act 2004". Not only does the defence fail to identify which provision within Part 3.2 of the Act is relied upon, but also the word 'invalid' is misleading, for a failure to comply with any of the provisions relied upon by the plaintiff does not render a costs agreement invalid. As a consequence, the defence does not enable the defendant to know the case against them and is inadequate.
The only provision in the Act which renders a costs agreement invalid is s 327, which states that a costs agreement contravening any provision within Division 5 Part 3.2 of the Act is void. However, in the court below the plaintiff relied upon provisions contained in Division 3 of the Act that require costs disclosure to be made to clients before, or as soon as possible after, a law firm is retained: ss 309 - 318 of the Act.
When the costs disclosure requirements in Division 3 of the Act have not been met, a law firm cannot recover legal fees until they have been assessed under the Act: see s 317(2) of the Act. No provision within Part 3.2 of the Act states that the costs agreement becomes invalid or void as a result of insufficient costs disclosure.
Leaving aside plaintiff's failure to specify the provisions in Part 3.2 upon which he relied, at best, non-compliance without Part 3.2 may render the Costs Agreement unenforceable, in the absence of further steps. It does not render the Costs Agreement "invalid".
Since s 317(2) of the Act prevents a law firm from suing under a costs agreement when the disclosure requirements have not been met, the costs agreement is effectively unenforceable, although legally valid. As the majority of the High Court recently reiterated in Gnych v Polish Club Limited [2015] HCA 23; (2015) 89 ALJR 658, the consequences of a contract's failure to meet statutory requirements is a matter of statutory construction (per French CJ, Kiefel, Keane and Nettle JJ at [36]-[40]). It is clear from the terms of s 317, read in the context of Division 3 as a whole, that when a law firm fails to make the disclosures required, a costs agreement becomes unenforceable until the legal costs are assessed under the Act, but the Costs Agreement is not "invalid" or "void".
Finally, the plaintiff's submission that any inadequacy in the pleading is remedied by the defendant's letter dated 1 October 2014 in which he states that the costs agreement "clearly complies" with section 309 of the Act is also erroneous, but the Costs Agreement is not "invalid" or "void".
In the original request for particulars, the defendant sought clarification of which provisions in Part 3.2 of the Act the plaintiff relied upon to prove that the costs agreement was invalid. The plaintiff responded that the costs agreement failed to comply with ss 309, 316 and 317 of the Act. Failure to comply with any of those sections, as previously stated, does not render a costs agreement invalid. Accordingly, the defendant's response on 1 October 2014 that their costs agreement complied with s 309 of the Act in no way indicated, as the plaintiff has submitted, that the defendant had chosen to proceed on the basis that the costs agreement complied with the Act, thereby curing the defect in the defence.
Moreover, it is a longstanding principle that particulars serve a distinct purpose in litigation and do not remedy a defect in a party's pleading: see Bruce v Odhams Press Ltd [1936] 1 KB 697 at [712]-[713]. Accordingly, even if the defendant's letter dated 1 October 2014 was interpreted differently, it does not overcome the inadequacy of the plaintiff's defence.

Third Ground of Appeal Submissions

The third ground of appeal relates to the Magistrate's findings that the defendant's costs agreements complied with various disclosure obligations in s 309 of the Act. The plaintiff submits that the Magistrate erred in law in finding that the costs agreements disclosed the plaintiff's right to negotiate a costs agreement with the defendant; the plaintiff's right to be notified of any substantial change to the matters to be disclosed; and the plaintiff's right to progress reports.
In relation to the obligation under s 309(1)(b)(i) of the Act to inform a client of his or her right to negotiate a costs agreement with a law firm, the plaintiff submits that the concluding words of the covering letter for the costs agreements, which the Magistrate found to satisfy the disclosure obligation, amounted to a 'take it or leave it or leave attitude'. The concluding words on the covering letter were as follows: "You may sign the agreement and forward it to us or confirm your instructions verbally and your agreement to our terms and conditions will be assumed if you instruct us to continue in this matter". 1. The Magistrate held that those words, when read with the final words on the tax invoices informing the plaintiff of the various procedures for disputing the bill, satisfied the defendant's obligation under s 309(1)(b)(i) of the Act since the word 'right' was "necessarily implicit".
In relation to the obligation under s 309(1)(b)(iv) to inform a client of his or her right to be notified of any substantial change in the matters required to be disclosed, the plaintiff submits the Magistrate conflated that obligation with the obligation to in fact notify the client of a substantial change. The plaintiff argues, and in my opinion correctly so, that the obligation to disclose the client's right to be notified of any substantial change is distinct from the obligation to actually notify the client of a substantial change. The Magistrate found that the updated estimate and subsequent tax invoices in the ASIC matter notified the plaintiff of substantial changes in the estimated costs of the proceedings.
In relation to the obligation under s 309(g) to notify a client of his or her right to progress reports in accordance with s 318, the plaintiff submits that the Magistrate did not deal with this issue in his reasons for judgment, despite this issue being the subject of submissions during the hearing in the Local Court.
The defendant submits that in the court below the plaintiff did not tender any evidence in support of their contention that the costs agreement did not satisfy the requirements under s 309 of the Act. The defendant further submits that the Magistrate did not make an error in his findings. Consideration
Part 3.2 of the Legal Profession Act 2004 is entitled Costs Disclosure and Assessments. The purposes of Part 3.2 is to ensure that law firms disclose certain matters in relation to legal costs to their clients, to regulate costs agreements between law firms and clients and the billing for legal costs, and to establish a costs assessment regime: s 301 of the Act.
Section 309(1) of the Act contains matters which must be disclosed to a client, which include, most relevantly: the basis on which legal costs are calculated; an estimate of legal costs; the intervals at which a client will be billed; the rate of interest the client will be charged for overdue legal costs; the clients rights to negotiate a costs agreement, to receive a bill, to request an itemised bill, to be notified of any substantial change, and to progress reports; the details of the person whom the client can contact regarding legal costs; and the various avenues and time limits which apply to resolve a dispute about legal costs. These matters must be disclosed to the client in writing before, or as soon as possible after, a law firm is retained in a matter: s 311 of the Act. Law firms are under an ongoing obligation of disclosure, that is, they must notify their clients of any substantial change as soon as reasonably practicable: s 316 of the Act.
In the event that a law firm does not comply with the disclosure obligations, a client is not required to pay the legal costs and the law firm is barred from instituting proceedings to recover its legal costs until those costs have been assessed: s 317(1)-(2) of the Act. Furthermore, a client may apply to set aside a costs agreement, a costs assessor may reduce the legal costs in proportion to the seriousness of the failure to disclose and the failure to disclose may constitute unsatisfactory professional conduct or professional misconduct: s 317(3)-(7) of the Act. The severity of the consequences for failing to comply with the disclosure obligations discussed above demonstrates the importance that the legislature has placed upon costs disclosure.
Part 3.2 also regulates costs agreements, that is, agreements between a law firm and a client regarding the payment of legal costs: s 302(1). Importantly, the provisions concerning costs agreements are contained within a separate division to those provisions discussed above. Therefore, it is clear that a costs agreement is not totally equivalent to a costs disclosure. While in most circumstances the costs agreement will contain the required disclosures, there may be other types of costs disclosures.
Under this ground of appeal, the plaintiff submits that the Magistrate erred in law by finding that the defendant had satisfied the disclosure requirements under s 309 of the Act. In the court below, the plaintiff argued that the defendant had not satisfied those requirements as a defence to the defendant's principal claim for payment of outstanding legal fees. Accordingly, the plaintiff bore the onus of proving that the defendant had not complied with the disclosure requirements.
To establish that the costs disclosure by the defendant was inadequate, the plaintiff had to prove, as a necessary precursor, what disclosure the defendant had made in relation to costs. Only then could the plaintiff argue that such costs disclosure was insufficient.
Proof of the disclosure that had been made by the defendant was also important since such disclosure may have been separate from or additional to the costs agreements existing between the parties. As stated earlier, costs disclosures are distinct from costs agreements. While it is common for legal practitioners to set out the matters required to be disclosed in a costs agreement, other documents may be prepared to satisfy those requirements.
At first instance the evidence largely consisted of the costs agreements, correspondence and tax invoices relating to the four matters in which the defendant acted for the plaintiff (annexed to Mr Russo's affidavit sworn on 4 September 2014). That evidence was tendered by the defendant to prove that an agreement existed between him and the plaintiff for the provision of legal services in exchange for the payment of fees.
The plaintiff relied on that evidence in the court below and in this Court, particularly the costs agreements, as evidence of inadequate costs disclosure. The plaintiff did not tender any other evidence. As previously mentioned, an affidavit sworn by the plaintiff, Mr Beradi, was not tendered. The plaintiff's failure to be available for cross-examination on the day of the hearing enables a Jones v Dunkel inference to be drawn, namely, that his evidence would not have assisted his case to be drawn: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. However, it is not necessary to make such inference in order to decide the issues before me.
Most importantly, the plaintiff did not tender any evidence to the effect that those costs agreements were the only costs disclosure made by the defendant. Moreover, on the evidence in this proceeding, it is probable that the defendant made additional costs disclosure to that contained in the four costs agreements.
The probability of additional costs disclosure having been made by the defendant arises from the disparity in the ASIC matter between the estimated costs and the costs actually incurred. In the costs agreement for the ASIC matter dated 6 June 2006, the defendant estimated the costs for its work to be "between $1,000 and $5,000". At that time, the matter was at an early stage, the plaintiff having only been served with a letter from ASIC requesting his participation in a voluntary interview.
However, following charges being laid against the plaintiff by ASIC (which occurred at some time before 28 June 2006, the date when the plaintiff faxed a copy of his Court Attendance Notice to the defendant), the legal costs incurred by the plaintiff in the ASIC matter dramatically increased, exceeding the original estimate in the costs agreement. For example, tax invoices dated 5 August 2006, 20 September 2006 and 18 April 2007 required the plaintiff to pay, respectively, $2,687.41, $4978.39 and $4031.71. Adding these amounts together, the plaintiff was required to pay to the defendant $11,697.51 in legal costs, an amount that vastly exceeded the original maximum estimate of $5,000. Furthermore, a tax invoice dated 20 September 2007, comprising mostly of the barrister's fees in preparation for the trial, required the plaintiff to pay $14,360.06.
In highlighting the disparity between the estimated cost and the costs actually incurred in the ASIC matter, I do not seek to criticise the defendant. Legal costs, especially in litigation, often increase as a result of the proceedings progressing less expeditiously than expected. In the ASIC matter, the defendant initially estimated its legal costs before ASIC had laid charges against the plaintiff. Rather, by highlighting this disparity, I wish to demonstrate that, on the evidence, it is probable that once the charges were laid against the plaintiff, the defendant revised its estimate of costs and provided additional costs disclosures.
The fact that the plaintiff did not tender any evidence that the costs agreements constituted the entire costs disclosure in the ASIC matter in circumstances where it is probable that the original estimate of costs was revised by the defendant and additional costs disclosures were made, means that the plaintiff cannot prove that the only costs disclosure made was contained in the costs agreements and, consequently, that such disclosure did not comply with the requirements in the Act.
As a further comment, it seems somewhat unjust that the plaintiff could successfully defend the defendant's claim for outstanding legal fees on the basis that the costs disclosure was inadequate when, in the eight years since receiving the benefit of the defendant's legal services, he has not sought a costs assessment under the Act, nor has he contended that the legal costs are unreasonable. The costs disclosure requirements under the Act are important as they ensure that clients receiving legal services are properly informed about the legal costs that they will be obliged to pay. The requirements were never intended by the legislature to be a technical obstacle to a lawyer receiving payment for legal services performed and about which the client has been properly informed.
If, contrary to my preferred view, it was for the defendant to prove disclosure in the proceedings below in order to ground the suit, I would make the following comments. First, there has been substantial disclosure by the defendant, even if confined to the costs agreements.
Secondly, the matter said not to be disclosed would have had, and have had, no effect on the charges rendered and the amount owing.
Thirdly, the undertaking by the plaintiff referred to at [14] above and the plaintiff's continued instruction to the defendant may well give rise to estoppel either expressly or by conduct.
Fourthly, and regardless of whether any estoppel arises, the inference available that I draw is that there was significant other correspondence from the defendant to the plaintiff concerning the terms of the retainer and, in the absence of evidence from the plaintiff, I draw the further inference that full disclosure occurred.
For the reasons set out above, this ground of appeal also fails.

Fifth ground of appeal Submissions

The fifth ground of appeal also relates to a failure to disclose one of the matters set out in s 309 of the Act. The fifth ground of appeal states that the Magistrate made an error of law in finding that the costs disclosure complied with s 309(k) of the Act, which requires a law practice to disclose to its client the fact that the law of New South Wales applies to the legal costs in the matter.
The plaintiff argues that the Magistrate failed to address this issue in his reasons and that he should have dismissed the defendant's claim on this basis alone, in accordance with s 317 of the Act. Consideration
This ground of appeal is easily dismissed on the basis that the plaintiff did not raise this argument in the court below. At the hearing before the Magistrate the plaintiff made no submission in relation to s 309(k) of the Act. Furthermore, as previously stated, the defence filed by the plaintiff in the Local Court failed to identify which provisions in Part 3.2 of the Act that it relied upon to prove that the costs agreement between the plaintiff and defendant was "invalid". The plaintiff also did not refer to s 309(k) in his letter of particulars dated 29 September 2014, which nevertheless, as stated earlier in this judgment, does not rectify a defect in a party's pleading.
Because the plaintiff did not raise this issue before the Local Court, I would refuse leave to raise the matter on appeal.

Sixth ground of appeal Submissions

The sixth ground of appeal is that the Magistrate erred in law by failing to apply s 317(1)-(2) of the Act by granting judgment to the defendant before the costs had been assessed.
The plaintiff argues that given, in his opinion, costs disclosure had not been complied with, the claim by the defendant was not maintainable and the law practice should have sought assessment of its costs by a costs assessor, rather than commence legal proceedings.
The defendant submits that this argument was also not raised by the plaintiff in the court below and, accordingly, the plaintiff must seek leave to raise it in this Court. Consideration
Section 317(1) provides that if a law practice fails to disclose a matter required to be disclosed, the client does not need to pay the legal costs until they have been assessed. Meanwhile, s 317(2) provides that a failure to disclose will result in any proceedings for the recovery of legal costs being not maintainable until the legal costs have been assessed.
As mentioned earlier, Division 11 of Part 3.2 of the Act establishes a costs assessment regime. An application for a costs assessment can be made by either a client or law practice: see ss 350 and 352 of the Act.
Following the application for a costs assessment, the law practice must not commence or maintain any legal proceedings to recover the legal costs: s 355 of the Act. A costs assessor has the power to request the parties to provide documents or written information, or to otherwise assist in the assessment: s 358(1) of the Act.
In essence, the costs assessor determines whether it was reasonable to carry out the legal work, whether the legal work was carried out in a reasonable manner and the fairness and reasonableness of the amount of legal costs: s 363(1) of the Act. In determining what the legal costs are, the costs assessor must, under certain circumstances, take into account any provisions in a costs agreement, unless, amongst other things, the agreement did not comply in a material respect with the disclosure requirements: s 361(1) of the Act. As a consequence, the costs assessor may, as part of the costs assessment, determine whether the disclosure requirements have been complied with by the law practice (s 359(3)(a) of the Act) and whether the cost agreement does not comply in a material respect with the disclosure requirements (s 361(1)(c) of the Act).
As is clear from the foregoing, the Act provides a comprehensive regime for costs assessment. I accept the plaintiff's submission that the purpose of this regime is to protect the lay person who may be at a disadvantage when negotiating legal costs.
However, for the reasons stated in relation to the third ground of appeal, the plaintiff has not established that there was no disclosure other than that contained in the costs agreements admitted in the court below. As a consequence, the plaintiff is unable to establish that the costs disclosure was inadequate and s 317 is not applicable.
Furthermore, for the reasons stated in relation to the first and second grounds of appeal, the plaintiff is prevented from relying on s 317 due to the inadequate defence. As discussed previously, the defence made no reference to s 317, but only to the costs agreements' "invalidity" as a result of failing to comply with Part 3.2 of the Act.
As stated, the effect of s 317 is not to render any costs agreement "invalid", but to prevent a law practice from recovering legal costs when an application for costs assessment is on foot. Finally, in this aspect, while the plaintiff's letter of particulars dated 29 September 2014 did refer to s 317, letters of particulars do not themselves cure a fault in the pleadings.
I am not satisfied that this alleged non-disclosure is material or that a costs assessor, acting reasonably, could so conclude. This particular of alleged non-disclosure was not raised below, is not material and leave to appeal on this ground is refused.
As a result of the foregoing, I make it clear, if leave to appeal were to be granted (which it is not) this ground of appeal would be dismissed.

Conclusion

For the foregoing reasons, the court makes the following orders: 1. Summons dismissed; 2. The plaintiff shall pay the costs of and incidental to the proceedings; 3. The parties are at liberty to apply for any special order as to costs. Such application may be made by a submission of no more than 3 pages and is to be filed within 14 days of the date of this judgment. Any other party affected by any application for a different or special order for costs may respond to such submission within a further 7 days. The issue will be dealt with on the basis of the submissions filed.

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: 16 October 2015

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