Plaintiff v Defendant

2 A number of bills were rendered by Oakley Thompson with the final bill being dated 8 December 2009. Although CEC has paid some costs, Oakley Thompson claims that there is an amount of approximately $35,000 that is still owed. It has sued CEC and Mr Viscariello in the Magistrates' Court for the amount it says is outstanding. Those proceedings were served on Mr Viscariello on 7 December 2010. The Magistrates' Court proceeding was initially fixed for trial on 10 April 2012 but was re-fixed for 22 May 2012.

3 By agreement of the parties, the trial in the Magistrates' Court did not proceed as scheduled because on 1 May 2012, Mr Viscariello filed a summons in the Costs Court for taxation of all of the tax invoices rendered by Oakley Thompson to CEC.[1] The summons sought review of the legal costs under s 3.4.38 of the Legal Profession Act 2004 (Vic) ("LPA"). An Associate Judge dismissed the summons on the basis that the LPA requires such an application to be made within 12 months and more than 12 months had passed since demand for payment of the costs had been made. The Associate Judge also determined that the time for making the application for review of the accounts could not be extended under the legislation because Mr Viscariello is a legal practitioner.

4 Mr Viscariello appealed from the orders made by the Associate Judge. The appeal is by way of a rehearing,[2] although the Court will give such weight to the decision of the Associate Judge as appears proper.[3]

5 Mr Viscariello contends that the legislative requirements have not been met such that the 12 month period for seeking a review of the invoices has not yet begun to run. He did not seek in the alternative to extend the time for making an application for a costs review.

(a) whether s 3.4.38 of the LPA requires both a bill to be given and a request for payment to be made before the 12 month time limit for making an application for a costs review begins to run;

(b) whether the tax invoices have been "given" to Mr Viscariello;

Does s 3.4.38 of the LPA require both a bill to be given and a request for payment to be made?

7 Costs disclosure and review is dealt with in Part 3.4 of the LPA. For the purposes of that Part:

(a) a person is a third party payer, in relation to a client of a law practice, if the person is not the client and -

(i) is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client; or

(ii) being under that obligation, has already paid all or a part of those legal costs; and

(b) a third party payer is an associated third party payer if the legal obligation referred to in paragraph (a) is owed to the law practice, whether or not it is also owed to the client or another person;[4]

8 In the Magistrates' Court proceeding, Mr Viscariello has pleaded that he is an associated third party payer and Oakley Thompson has denied this. For the purposes of this appeal, I have assumed (without deciding the point) that Mr Viscariello is an associated third party payer.

9 Section 3.4.38 of the LPA permits clients and third party payers to seek a costs review. In part that section provides:

(2) A third party payer may apply to the Costs Court for a review of the whole or any part of legal costs payable by the third party payer.

(3) An application for a costs review may be made even if the legal costs have been wholly or partly paid.

(4) If any legal costs have been paid without a bill, the client or third party payer may nevertheless apply for a costs review.

(5) An application by a client or third party payer for a costs review 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.

(6) 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 Court if the Supreme Court constituted by a Judge of the Court within the meaning of the Supreme Court Act 1986, on referral by a Costs Judge or the client or third party payer who made the application for review, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for review to be dealt with after the 12 month period.

10 Mr Viscariello contends that under s 3.4.38(5)(a) both a bill must be given and a request for payment made to the third party payer before the 12 month period begins to run. He submitted that this must be so because third party payers do not incur a liability to pay until they have been given the bills. Mr Viscariello relied on s 3.4.33 which provides that a law practice must not commence proceedings to recover legal costs from a person until at least 65 days after the giving of a bill. That section also specifies that the bill must be given in accordance with ss 3.4.34 and s 3.4.35 LPA. Mr Viscariello submitted that s 3.4.34(4) LPA is relevant here. That section provides:

(4) A bill is to be given to a person -

(a) by delivering it personally to the person or to an agent of the person; or

(b) by sending it by post to the person or agent at -

(i) the usual or last known business or residential address of the person or agent; or

(ii) an address nominated for the purpose by the person or agent; or

(c) by leaving it for the person or agent at -

(i) the usual or last known business or residential address of the person or agent; or

(ii) an address nominated for the purpose by the person or agent -

with a person on the premises who is apparently at least 16 years old and apparently employed or residing there.

11 Section 3.4.35 provides that, except in the case of a sophisticated client, a bill must include or be accompanied by a written statement setting out the various avenues that are open to the client in the event of a dispute in relation to legal costs.[5] Mr Viscariello submitted that there was no evidence that the bills complied with this disclosure requirement. Further he submitted that the time for him to request bills in itemised form had not begun to run, as under s 3.4.36 he has 30 days to make such a request after the bills are given to him. His submission was that none of the times under the various provisions has commenced to run as, on his argument, the bills had not been "given" in accordance with the LPA.

12 I do not accept Mr Viscariello's contention that because the entitlement to recover costs is dependant upon a bill with any relevant disclosures being given, it must follow that the proper construction of s 3.4.38(5)(a) is that a bill must always be given before time starts to run for seeking a review of the costs. The right to recovery and the right to review are separate matters. Whether the time period which must elapse before bringing proceedings has passed does not affect whether the time limit for seeking a review has expired. Moreover, whilst the failure to make disclosure as to the avenues open in the event of dispute about the costs has certain consequences (including that the law practice must not commence recovery proceedings), it does not prevent time from running for a third party payer seeking a costs review.[6] Similarly, whether time has or has not commenced to run for requesting an itemised bill does not affect the time limit for seeking a costs review.

13 Rather, I can see no reason why the word "or" in the phrase "the bill was given or the request for payment was made" in s 3.4.38(5)(a) should not be given its usual disjunctive meaning. A construction which would substitute the word "and" for "or" is not necessary to address any apparent difficulty that would arise if the disjunctive meaning is given to the word. The section can work perfectly well as drafted with time running from the occurrence of either event. What is important for s 3.4.38(5)(a) is that it is known that the solicitors are seeking their costs, either because they have sent a bill or because they have otherwise asked for payment. There is then 12 months in which to seek a review of the costs.

14 Consideration of the purpose of the legislation and its history supports this construction.[7] One of the purposes of Part 3.4 of the LPA is to provide a mechanism for the review of legal costs.[8] Part of the mechanism is the imposition of a 12 month time limit for seeking review that can only be extended when the person seeking the review is not sophisticated and it is just and fair in the circumstances of the case. It is in that context that the LPA contemplates three events which will start time running: first, the giving of a bill; second, a request for payment even if there is no bill; third, the payment of costs even though neither a bill is given nor a request is made. The first two events are dealt with in paragraph (a) of s 3.4.38(5) and the last is provided for in paragraph (b) of that section.

15 The current wording of s 3.4.38 was introduced by s 56 of the Legal Profession Amendment Act 2007 (Vic). Prior to that, the legislation did not include the term "third party payer." Rather, s 3.4.38 provided for a "client" to make application for a costs review. "Client" was broadly defined and included a person who is liable to pay legal costs. Sub-section (4) provided:

An application under this section must be made within 60 days after the bill was given or the request was made or the costs were paid (whichever is earlier or earliest).

16 The wording of that provision made it clear that any of the three events would start time running.

17 The Explanatory Memorandum[9] for the amending legislation stated in respect of the new s 3.4.38:

substitutes section 3.4.38 of the Principal Act in accordance with amendments to the national model provisions to set out how and when third party payers may apply for costs reviews. The amendment also increases the time for clients and third party payers to apply for a costs review from 60 days to 12 months. Out-of-time applications may be made with leave of the Supreme Court. [10]

18 The second reading speech[11] for the amending bill included the following:

Third-party payers - costs disclosure and costs review

These rights will also be extended to a person who is liable to pay the legal costs but is not themselves the client of the law practice. These people will be defined as 'third-party payers' through a new definition in the act. For example, in some cases borrowers are required to pay the legal costs of the lender in the preparation of mortgage documents. The amendment will give such borrowers the option to have the lender's legal costs reviewed if they believe they are too expensive.

The bill also includes amendments to extend costs disclosure to these 'third-party payers'. One circumstance where this might arise is where parents pay for the legal fees in a matter in which their child is the client of the law practice.[12]

19 There is no suggestion in the legislation itself, the Explanatory Memorandum or the second reading speech that there was any intention to depart from the way that the earlier legislation had operated in requiring only one of three events to occur to start the time running for seeking a costs review.

20 This is not a case in which it is clear that there has been a printing or drafting error in the text of the legislation that requires correction.[13] Nor is it a case in which the context dictates a conjunctive interpretation of the word "or."[14]

21 In my opinion, when properly construed, s 3.4.38(5) provides that the 12 month period begins to run when either a bill is given or a request for payment is made or where neither of those things happens, but the costs are nevertheless paid.

22 Before considering whether the Oakley Thompson bills have been given or a request for payment has been made, I note that there are conflicting authorities as to whether the 12 month time limit for an interim bill only runs from when the time limit for the final bill would run.[15] In this case, it is not necessary to consider which of the authorities is to be preferred because if the time limit has expired, it has expired for the final bill.

23 Mr Viscariello submitted that he has never been "given" the bills in his capacity as a guarantor. Counsel for Mr Viscariello accepted that there is no doubt that the bills were sent to Mr Viscariello in his capacity as a solicitor for CEC. However, counsel contended that this is insufficient. He submitted that Oakley Thompson were required to specify that the accounts were sent to Mr Viscariello in his capacity as a guarantor and, having failed to do that, he argued the accounts have not been "given."

24 I am satisfied that all of the bills were "given" to Mr Viscariello, for the purposes of s 3.4.38(5)(a). In my opinion, the legislation does not require the sender of the bills to specify that they are giving them to the recipient in any particular capacity. Therefore, it does not matter in which of his capacities the invoices were sent to or received by Mr Viscariello. What is important is that he did receive them. Moreover, not only did Mr Viscariello receive them, but he was clearly aware of the right to seek a costs review. On 12 January 2010, Oakley Thompson informed Mr Viscariello by email that it was commencing legal action against CEC and that unless the debt was paid within 28 days, proceedings would be issued against him personally pursuant to the guarantee. Mr Viscariello responded to this email the same day. Among other things he said "We are instructed to file an urgent application on behalf of our client for a Costs Review under section 3.4.38" of the LPA. No application by CEC or Mr Viscariello was filed at that time. Rather, Mr Viscariello waited more than two years after that to seek a review.

25 In any event, there has unarguably been a request for payment of at least some of the bills. Mr Viscariello conceded that service of the Complaint on 7 December 2010 constituted a demand for payment of the bills that are the subject of the Magistrates' Court claim, including the final unpaid bill dated 8 December 2009. The summons for taxation was not filed until 1 May 2012, well outside the 12 month time limit.

26 However, Mr Viscariello contended that no request for payment had been made in respect of the paid accounts. Those accounts were paid before he had entered into the guarantee in favour of Oakley Thompson. Accepting for the purposes of the argument that:

(a) Mr Viscariello would be entitled to seek a costs review of those paid bills;

(b) those bills could not have been "given" to Mr Viscariello because he was not a guarantor at the time;

(c) no request for payment could have been made to him because he was not a guarantor at the time; and

(d) time runs for each interim bill from the giving of that bill and the requesting of payment of that bill (rather than from the giving of the final bill and request for payment of the final bill),

nevertheless the time limit would have expired. That is because under s 3.4.38(5)(b) more than 12 months had passed since the costs were paid.

27 There is one other matter which I will address. Counsel made an open offer in Court on behalf of Mr Viscariello:

(a) to pay all of the costs ultimately ordered once "taxed";

(b) to pay the whole of the claim into Court pending determination of the costs review; and

(c) pending the decision on review, to pay into Court an amount for Oakley Thompson's reasonable costs for having a bill in taxable form prepared.

28 Counsel for Mr Viscariello submitted that the prejudice to him if he was not permitted to seek a costs review would be that he would have to pay all the costs, including costs that he may not have had to pay had the bills been taxed and which he submitted he should not pay. On the other hand, counsel contended that the only prejudice that Oakley Thompson could suffer is that it may have to have the costs taxed and Mr Viscariello is willing to put the amount of the claim and the costs of preparation into Court.

29 However, the offer made and the submissions about it are based on the erroneous assumption that it is open for Mr Viscariello to have the costs reviewed. The legislation sets down a time limit for a third party payer seeking a review of costs. Once that time limit has expired (as it has here) no review can be sought by the third party payer unless the time is extended. Counsel for Mr Viscariello opened his submissions by stating that Mr Viscariello was not seeking an extension of time. I might add that had he done so, I would agree with the Associate Judge that time could not be extended because Mr Viscariello is an Australian legal practitioner and would therefore be a sophisticated client were he a client of Oakley Thompson.[16] That being so, s 3.4.38(6)(b) would prevent an extension of time being granted to him. [17]

30 Section 3.4.38(5)(a) does not require that a third party payer be given a bill and be asked to pay before the 12 month time limit for seeking a costs review will start to run. Rather, time starts to run when either of those events occurs. It is not necessary for the law practice to give the bills to a third party payer in any particular capacity. If the bills are given to that person, then time starts to run.

31 For the reasons I have stated above, I am satisfied that Mr Viscariello was given all of the bills that he seeks to have reviewed and that the time for seeking a review has expired. I am also satisfied that in respect of the unpaid bills which are the subject of the Magistrates' Court proceeding, Oakley Thompson made a request for payment to Mr Viscariello. Even if an argument were to be accepted that the earlier paid accounts could not have been given to him and he could not have been requested to pay because he was not at the time a guarantor, time would have run from the date of payment. As such, on any view, the 12 month time limit has expired in respect of those accounts as well.

32 The appeal will be dismissed. I will hear the parties as to costs.

[1] The trial in the Magistrates' Court is now listed for hearing in October this year.

[2] Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 77.06(7).

[3] Southern Motors Pty Ltd v Australian Guarantee Corporation Limited [1980] VicRp 23; [1980] VR 187 at 189-190.

[5] The full text of s 3.4.35(1) and (2) LPA reads:

(1) A bill must include or be accompanied by a written statement setting out -

(a) the following avenues that are open to the client in the event of a dispute in relation to legal costs -

(ii) the setting aside of a costs agreement under section 3.4.32;

(b) any time limits that apply to the taking of any action referred to in paragraph (a).

(2) Subsection (1) does not apply in relation to a sophisticated client.

1. [7] Section 35 of the Interpretation of Legislation Act 1984 (Vic) provides that a construction that would promote the purpose or object underlying an Act must be preferred to a construction that would not promote that purpose or object.

[9] In interpreting legislation, consideration may be given to explanatory memoranda: s 35(b)(iii) Interpretation of Legislation Act 1984 (Vic).

[10] Explanatory Memorandum, Legal Profession Amendment Bill 2007 at 18.

[11] In interpreting legislation, consideration may be given to reports of proceedings in any House of the Parliament: s 35(b)(ii) Interpretation of Legislation Act 1984 (Vic).

[12] Victoria, Parliamentary Debates (Hansard), Legislative Assembly, 28 February 2007, 561 (The Hon. R. J. Hulls, MP).

[13] See, for example, Re Trade Practices Tribunal; Ex parte Tooheys Ltd [1977] FCA 22; (1977) 16 ALR 609 at 616-17. See also, DC Pearce and RS Geddes, Statutory Interpretation in Australia (Lexis Nexis Butterworths, 7th ed, 2011) [2.28]-[2.29].

[14] See, for example, Unity APA Ltd v Humes Ltd (No.2) [1987] VicRp 43; [1987] VR 474 at 481-482; Pileggi v Australian Sports Drug Agency [2004] FCA 955; (2004) 138 FCR 107, [36]-[44]. See also, DC Pearce and RS Geddes, Statutory Interpretation in Australia (Lexis Nexis Butterworths, 7th ed, 2011) [2.29]-[2.30].

[15] Dromana Estate Limited v Wilmoth Field Warne (a firm) [2010] VSC 308 contra Retemu Pty Ltd v Ryan (Unreported, District Court of NSW, Coorey DCJ, 16 April 2010); Turner v Mitchell Solicitors and Business Advisors Qld [2011] QDC 61; Golder Associates Pty Ltd v Challen [2012] QDC 11. See also Mustafa v Velos [2012] VSC 133 and Tabtill No 2 Pty Ltd v DLA Phillips Fox (a firm) [2012] QSC 115.

[16] For the meaning of "sophisticated client" see ss 3.4.2, 3.4.12(1)(c), 1.2.1, 1.2.3(a) and 1.2.2 LPA.

[17] For the full text of s 3.4.38(6)(b) LPA see [9].