The plaintiff, a retired solicitor, has sued the defendants for allegedly outstanding fees arising from legal work he did for them in 2006 and 2007. The defendants say any work that was done was performed on a pro-bono basis.
The dispute has given rise to a number of interlocutory applications, most relevantly an application by the defendants for the proceedings to be dismissed. This application, which was not successful, came before Balla DCJ. Her decision is dated 2 October 2015. Her Honour's reasons provide a useful background to the dispute.
On 4 November 2015 I made orders allowing for the matter to proceed by way of a decision on two separate questions. Those questions are:
1. Whether the whole or any part of the proceedings must be dismissed consequent to the effect of Section 317(2) of the Legal Profession Act 2004; and
2. If the defendants are successful on their Motion dated 22 October 2015, (ie on the first question) does that necessarily mean that the costs assessment must be abandoned under the Legal Profession Act 2004?
The first question depends on an interpretation of Section 317(2) of the Legal Profession Act 2004 (the "LPA"). The subsection is in the following terms:
"Bar on recovering proceedings until legal costs assessed
A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been assessed under Division 11."
There is no dispute that there had not been the necessary disclosure under the LPA as required in Section 317(2). This fact led to the defendants filing a Notice of Motion that the proceedings should be dismissed pursuant to the above section.
The Notice of Motion in turn led to the first of the separate questions, the primary issue being whether or not the bar on proceedings being maintained was automatically fatal to the proceedings.
The plaintiff's position is that a distinction is to be made between the maintenance of proceedings and their commencement. According to the plaintiff the prohibition on the proceedings being maintained did not stop the proceedings being commenced although it was acknowledged that there would inevitably be a stay of the proceedings pending the outcome of the costs assessment.
I note the following dates:
1. The plaintiff started to act for the defendants in June 2006. The precise date for the commencement of the retainer is unclear.
2. The plaintiff's retainer was terminated on 27 October 2007.
3. An application for costs assessment was made on 5 December 2014, more than seven years after the termination of the plaintiff's retainer.
4. The plaintiff made a costs disclosure on 2 June 2007.
5. The proceedings were commenced by the filing of a Statement of Claim on 8 October 2013.
[3]
The first question
The defendants relied on three authorities in support of its position that the proceedings must be dismissed because they could not be maintained. These authorities are:
1. Darkinjung Local Aboriginal Land Council v Darkinjung Pty Ltd & Ors [2010] NSWSC 132 (Austin J).
2. Martinez v Morris & Anor [2011] FMCA 478 (Driver FM).
3. Baynes & Anor v Kalyk [2003] NSWSC 607 (Master Malpass).
The plaintiff submitted that the decisions of Master Malpass and Federal Magistrate Driver (as he was then known) were both wrong because the respective judicial officers had interpreted 'maintain' to include 'commence'. It was submitted that the decision of Austin J had been misinterpreted and that it related only to the commencement of proceedings where there had been non-compliant bills issued by the solicitor.
The decision of Master Malpass in Baynes concerns facts which are the most similar to the current case, although the relevant sections are under earlier legislation (Legal Profession Act 1987). It was submitted by the plaintiff that the Master's comments in paragraphs 25 and 26 involve a construction by which the word 'maintain' is taken to include commencement of proceedings. The plaintiff submitted that this could not be so on any interpretation of the word 'maintain'. The relevant paragraph in Martinez is paragraph 6.
The plaintiff was at pains to urge upon me that the word 'maintain' did not mean that proceedings could not be commenced. In support of this submission the plaintiff made the following points:
1. As a matter of simple interpretation 'maintain' did not mean 'commence'.
2. If the legislature had wished to prohibit the commencement of proceedings it would have been specifically stated.
3. Other sections of the LPA supported the plaintiff's contentions. For example, Section 331 refers to commencement of legal proceedings, as does Section 355.
4. It was pointed out that Section 331(1) gives an express power to commence proceedings and then in subsection (4), this applies even where there has been no costs agreement. If proceedings were commenced without there being a costs agreement the proceedings would be stayed until the issue of a costs certificate under Section 368.
5. In relation to Section 355 it was submitted that subsection (b) specifically contemplates proceedings being commenced after an application has been made for a costs assessment. It was submitted that the phrase "must not commence or maintain" contemplated proceedings being commenced after an application for assessment.
6. UCPR 36.10(1)(a) and (b) supported the plaintiff's position because they contemplated a costs assessor's certificate being filed in existing proceedings. Support for the submission was derived from the decision of McCallum J in Coshott v Barry [2012] NSWC 850 at paragraph 47.
The plaintiff referred to the Macquarie Dictionary definition of 'maintain' which is as follows:
"1. to keep in existence or continuance; preserve; retain.
2. to keep in due condition, operation, or force; keep unimpaired.
3. to affirm; assert (with a clause, or with an object and infinitive).
4. to support with speech or argument, as a statement, etc.
5. to keep or hold against attack.
6. to provide with the means of existence."
The plaintiff particularly relied on the first definition, "to keep in existence or continuance; preserve; retain".
The next matter raised by the plaintiff was that an interpretation favourable to the plaintiff should be given if to do otherwise would result in an unfair prejudice to the plaintiff. Thus it was submitted that if a plaintiff was not permitted to commence proceedings, notwithstanding that those proceedings would then inevitably be stayed, then the limitation period might expire thus preventing the plaintiff from commencing proceedings at all.
I agree with the plaintiff's submission that an apparently unjust result might flow from a limitation period expiring because a plaintiff was prevented from commencing proceedings. I also agree that the word 'maintain' does not, without more, mean 'commence'. Despite this agreement I think the defendants are ultimately correct that Section 317(2) does not allow for the commencement of proceedings until the condition inherent in the section has been complied with. As already stated, there is no dispute in this matter that the condition has not been met.
The issue, in my view, is not whether 'maintain' means 'commence', rather it is whether a proceeding which has been commenced can remain on foot while the condition remains outstanding. In other words, the real question is whether there is a consequence of not being able to maintain proceedings rather than whether or not they can be filed in the first place. I think this interpretation is consistent with the definition provided by the plaintiff from the Macquarie Dictionary in that proceedings cannot be kept "in existence" as long as there is a contravention of Section 317(2).
The fact that the proceedings might be stayed after commencement does not assist the plaintiff. Stayed proceedings still exist. Even if stayed indefinitely the proceedings remain maintained, albeit not progressed.
It may be that in a practical sense my interpretation of the word 'maintain' leads to a conclusion that proceedings cannot be commenced. This would not properly reflect my view although I do think that if proceedings are commenced then, assuming the point is taken, those proceedings must automatically be dismissed.
Ultimately perhaps the approach taken by Master Malpass is not the same as that I have taken but it is of the same practical effect.
In relation to Sections 331 and 355 I do not see that the inclusion in those sections of a reference to a commencement of proceedings is relevant to my decision. Those sections deal with specific circumstances and do not of themselves influence the interpretation of Section 317(2). In addition, I disagree with the plaintiff's interpretation of Section 355(b) to the extent that it was submitted the wording of the subsection necessarily contemplates, by use of the word 'maintain' that proceedings have already been commenced. To the contrary, the wording may be seen as consistent with my interpretation to the effect that if proceedings are commenced they cannot be continued.
As far as Rule 36.10 is concerned I do not see the rule as suggesting that proceedings were necessarily in existence before the cost assessor's certificate was prepared. I also do not see the contents of paragraph 47 of McCallum J's judgment as contradicting my approach. Rather her Honour seems to be taking a practical approach to the facts before her rather than deciding the issue that is before me.
The result of my conclusion is that the answer to the first question is 'Yes'.
The next issue is what orders should flow from my conclusion.
The defendants submitted that the whole of the Statement of Claim should be dismissed. The plaintiff submitted that only part should be dismissed leaving in existence that part of the pleading that is consequent upon the cost disclosure that occurred on 2 June 2007. The plaintiff submitted that this disclosure is admitted in paragraph 11 of the Amended Defence dated 27 April 2015.
The defendants submitted that whatever its Amended Defence might say the issue was not open for discussion because Balla DCJ in her judgment of 2 October 2015 had said, at page 4: "I proceed on the basis that, on the material before me, the plaintiff cannot possibly succeed in showing that he complied with the disclosure requirements of the 2004 Act". The defendants pointed out there had been no appeal from her Honour's decision. There are two difficulties with the defendants' submission:
1. One would be very surprised if the plaintiff would have appealed from her Honour's decision because her Honour refused the defendant's application to strike out the Statement of Claim.
2. In any event I think it plain from a reading of the whole of her Honour's decision that she was dealing with the alleged costs agreement dated 1 August 2005 and not with the disclosure in June 2007.
There is however a fundamental flaw in the plaintiff's position that a part of the Statement of Claim can continue to be maintained. This is that the Statement of Claim in its present form does not allege a cause of action arising from the June 2007 disclosure. The plaintiff said that such a cause of action could be inferred from the reference to invoices dated after 2 June 2007 in paragraph 3 and to the "claims" in paragraph 9 under sub-headings (p), (q) and (r). I disagree.
In my view the pleading in its current form does not seek relief specifically arising from the disclosure in June 2007. In fact this disclosure is not mentioned in the whole document. Rather the document pleads an agreement in August 2005 together with alternate bases for relief if that agreement does not suffice to establish the plaintiff's claim (for example unjust enrichment). The pleading does not allege a disclosure in June 2007 giving rise to an entitlement to payment for work done after that date. Accordingly I think the whole of the Statement of Claim must be dismissed.
[4]
The second question
The defendants submitted that the application for costs assessment was statute barred because it had been brought outside the six year limitation period imposed by Section 14 of the Limitation Act 1969. It was not disputed that the application was filed in December 2014, more than seven years after the June 2007 cost disclosure and again more than seven years after the plaintiff's retainer was terminated.
The defendants submitted that it was plain from Cockburn v Shehadie [2013] NSWSC 758 that the Limitation Act applied to an application for a costs assessment order. In this matter Button J dismissed an appeal from a cost assessment review panel which had "determined that s 14 of the Limitation Act had the effect that the defendant had no liability to pay the claimed legal costs of the plaintiff." His Honour found that no error or law had been identified.
It is important to note however that Button J's decision was based on the recovery of legal fees being a cause of action (paragraph 36). Accordingly, as the Limitation Act applied to causes of action his Honour found no error in the panel's decision. His Honour was not deciding whether the costs assessment process was a cause of action and therefore capable of being statute barred.
This question was however specifically addressed by McCallum J in Coshott v Barry. In paragraph 52 her Honour stated: "I am not satisfied that the lodging of an application for a costs assessment amounts to bringing an action on a cause of action within the meaning of the Limitation Act".
In paragraph 54 her Honour said: "The process undertaken by a costs assessor is administrative and is not subject to any limitation period (except that the application may not be made until after 30 days had passed since the bill was given: Section 201(2))."
Notwithstanding her Honour's view about the administrative nature of the costs assessment procedure her Honour then went on to say that any certificates that were produced by the procedure could not be enforced because in doing so the legal proceedings that would be necessary would be statute barred. This point, I think, creates a consistency with Button J's decision in Cockburn.
In addition to Coshott v Barry I think it also worth referring to the decision of Bell J (then in the Supreme Court) in Lenin v Coshott [2007] NSWSC 630 in which her Honour proceeded on the basis that costs assessments were not time barred by the Limitation Act (paragraphs 16 and 17).
I think it plain therefore that while the costs assessment procedure itself is not time barred, that court action arising from a resulting costs certificate would be subject to the Limitation Act. The second separate question asks if the assessment "must be abandoned" (underlining added). The only reason advanced by the defendants for abandonment is that it is time barred. Having rejected that submission I cannot find the assessment must be abandoned, although I can say I see no practical reason for it to continue.
Accordingly, the answer to the second question, with considerable reservation, is 'No'.
However, the costs assessor should be informed of my decision. As stated by McCallum J, at paragraph 55: "The question is one of utility. If the only purpose of the assessment was to obtain judgment for an extinguished debt, a costs assessor could properly decline to undertake the assessment, in my view."
As far as the costs of the hearing before me are concerned, as well as the costs of the proceedings generally, I am of the view that they should be paid by the plaintiff. However, I will give the plaintiff the opportunity to be heard on these costs. I also do not think any previous costs orders in the plaintiff's favour should be disturbed.
I make the following orders:
1. The first separate question is answered as follows: 'Yes'.
2. The second separate question is answered as follows: 'No'.
3. The plaintiff's proceedings filed on 8 October 2013 are dismissed.
4. Subject to further order, the plaintiff is to pay the defendants' costs of the proceedings including the costs of the hearing of the separate questions. This order does not affect any contrary costs orders previously made.
[5]
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Decision last updated: 10 December 2015