Stjepanovic v Petrovich Law Group Pty. Ltd. Trading As NSW Compensation... [2021] NSWDC 432 | Case summary

Stjepanovic v Petrovich Law Group Pty. Ltd. Trading As NSW Compensation... [2021] NSWDC 432 | Case summary | Zoe

Judgment

Each of the plaintiffs in these proceedings seeks repayment by their former solicitor, NSW Compensation Lawyers, of professional costs recouped by the solicitor from settlement monies for the provision of legal services in relation to a claim for personal injury damages. The issue is whether or not the defendant, in each matter, contracted out of the relevant statutory provisions designed to place caps on costs.
The plaintiffs' claims, which were heard together, are as follows: 1. The claim brought by Mrs Pavlovic was a work injury claim and the question is whether there was a failure to contract out within the meaning of reg 103 of the Workers Compensation Regulation 2010 (NSW). 2. The claim brought by Mr Stjepanovic arose out of a motor vehicle accident and the relevant regulation is reg 11 of the Motor Accidents Regulation 2005 (NSW).
As both regulations permit a contracting out of fixed regulated costs in terms which are similar, it is appropriate to deal with those of these claims in the same judgment (although in separate sections of the judgment), notwithstanding the different statutory regimes applicable to work injury and motor vehicle injury claims.
The plaintiffs do not complain of poor representation, or a bad result, or that the fees charged were not fair and reasonable. The question is one of compliance with regulations for disclosure of costs under the Legal Profession Act 2004 (NSW)("the Act"), the statutory regime in place when these actions were conducted.
The plaintiffs each claim that proper disclosure in accordance with the regulations was not made because the defendant failed, before entering into the costs agreement, to advise each of them respectively, before they entered into a costs agreement, in a separate written document, that, even if legal costs were paid by the opposing party, each of them would still be liable to pay additional amounts of costs provided for in a costs agreement for amounts exceeding that which would be payable under the legislation. There was also a failure to disclose in paragraph 3 of the costs agreement.
The defendant contends that even if there were deficiencies in the manner of disclosure, there was nevertheless sufficient disclosure made under the Act to engage the relevant regulations and that accordingly the defendant had properly contracted out of the fixed costs provisions. The defendant also challenges the plaintiffs' claim that the defendant did not comply with the disclosure provision in the Act, specifically in relation to the costs estimates in paragraph 3 of the costs agreement.
The defendant also raised alternative arguments in the event that they failed on the principal issues. The first of these was that the plaintiffs' remedies lay only in contract. The second was that the plaintiff's rights were restricted to her rights under the contract, as she did not apply for an assessment of costs or an extension of time to seek an assessment of costs. The defendant also challenges the entitlement of the plaintiff to restitution, which involves the question of whether it would be unjust to order restitution.
The issues identified in the parties' respective Statement of Issues vary significantly from the issues raised at the hearing, particularly in the case of the plaintiffs. In his Statement of Issues, Mr Baran identified the doctrine of illegality and "unlawful conduct of injustice" as issues for determination, but these claims were not pursued. In addition, although not set out in the Statement of Issues, he sought to challenge compliance with the disclosure provisions in the costs agreement, although restricting this to the estimate of fees (Frontier Law Group Pty Ltd v Robert Glenn Barkman [2016] NSWSC 1542 at 38). The plaintiffs' Statement of Issues was also silent as to the defendant's alternative arguments, as was the brief outline of submissions provided on their behalf; these issues were barely touched upon by Mr Baran even in oral submissions.
The principal issue is whether the disclosure documentation was provided "separately" and "before" the plaintiffs entered into their respective costs agreements.

[5]

The costs agreement sent to Mrs Pavlovic

Mrs Pavlovic received the following documents: 1. A document headed "Standard Costs Agreement (Work Injury Damages); 2. A document headed "Annexure A" and "Standard Costs Disclosure (Work Injury Damages)"; and 3. A document headed "Annexure B" and "Standard Costs Disclosure (Work Injury Damages").
I set out the text of the first of these documents in full: "Standard Costs Agreement (Work Injury Damages) Date 5 July 2012 To Jadranka Pavlovic Address: [redacted] A. This document is an offer to enter into a costs agreement with you. B. The work we have been instructed to do pertains to your claim for personal injury damages following injury which you sustained on and will include the following services: a. Obtaining instructions from you in respect of the circumstances of the injury/Incident, including briefing investigators to take statements from witnesses; b. If you have lost income as a result of the injury, to obtain all documents to prove such loss, this may include in engaging an accountant to prepare a report; c. Obtaining all medical reports to prove the nature and extent of your injuries; d. To have a view of the scene of the accident, including instruction Counsel to attend at the view and/or engage a consultant expert to attend at the view and take photographs to tender as evidence at the hearing; e. To engage an appropriate expert or experts to investigate your claim with regard to the issue of negligence on the party responsible and to obtain a copy of the Police accident report, incident report or any medical record and a copy of the statements obtained by the Police, WorkCover, health institution and/or other authority and, (if appropriate) to obtain a copy of the transcript of the hearing of Police proceeding against the party considered responsible, WorkCover report or health record relating to any enquiry or prosecution against the party considered responsible. f. To draft all pre-hearing and pre-assessment documents, applications, Court pleadings, with the assistance of a Barrister, if necessary and attend with or without Counsel, mediation, assessment, arbitration and court hearings; and g, With your prior authority in writing to brief Senior Counsel if we consider that the complexity, nature and quantum of your claim warrants the retainer of Senior Counsel, in which case we will require you to sign the necessary fees and disclosure agreement with Senior Counsel. h. All other acts necessary to act on your behalf and pursue your claim. C. The disclosure requirements which we are required to provide you with under the Legal Profession Act 2004 are contained in Annexure "A" which forms part of this document. D. Acceptance of Offer If you accept this offer, you must sign and return this document to us. We will not do any work on this matter until this is done. If you do so, you have entered into a conditional costs agreement with us. This means that you will be bound by the terms and conditions in this agreement, including being billed-in accordance with it. Failure to accept our offer, within 7 days of dispatch of this document, can result in the immediate withdrawal of our offer to act on your behalf. Cooling off period If you wish to terminate this agreement, you may do so within 5 clear working days of signing the conditional costs agreement. The cooling off period ends at 5pm on the fifth business day after the day on which this agreement was signed. If you do so, we will only charge the costs incurred for work done that was performed on your instructions and within your knowledge up to termination. E. Termination of Agreement E1. We will cease to provide our services to you if any of the following circumstances occur: (a) you do not pay our bills of costs; or (b) you do not provide us with adequate instructions within 14 days of our request, or (c) you give us instructions which are deliberately false or intentionally misleading, or (d) you decline to accept an offer of settlement which we and your Counsel consider to be reasonable; or (e) you refuse to accept advice which we or Counsel give you at any stage of the matter; or (f) you consult another law practice to give you advice in the matter without our approval; or (g) on reasonable grounds, we believe that we may have a conflict of interest; or (h) you advise us that you have ceased to have confidence in our firm; or (i) any other just cause. We will give you at least fourteen (14) days' notice of our intention to terminate our agreement, and of the grounds on which the notice is based. E2. You may terminate this agreement at any time by giving us notice. E3. If the agreement is terminated either by you or by us, you will be required to pay us professional fees and charges for work done, and the expenses and disbursements which we have incurred, up to the date of termination. For lump sum fee matters, you must pay the part of our lump sum fee that we reasonably estimate has been incurred In respect of the legal services provided to you up to the date of termination, plus charges, expenses and disbursements, subject to your right to a costs assessment. You will be responsible to pay our costs and disbursements whether or not the other party to court proceedings is ordered to pay your costs and disbursements of the proceedings. On termination, we are entitled to retain possession of your papers and documents while there is money owing to us for our charges and expenses, unless and until security is provided for our costs. F. Retention of your documents We will, on completion of the Work, retain any papers to which you are entitled, but leave in our possession (except documents deposited in safe custody) for no more than seven (7) years. and on the undertaking that we have your authority to destroy the file seven years after the date of the final bill rendered by us in this matter. We will charged a fixed file storage fee of $77 to retain your file for the duration of seven years. You are able to access your file during that time, however, there will be a file retrieval fee of $110 to access the file. G. Privacy Protection Personal information about you, provided by you and other sources, is protected under the Privacy Amendment (Private Sector) Act 2000. Disclosure of such information may be compelled by law (eg. under the Social Security Act). You also authorise us to disclose such information where necessary to others in furtherance of your claim/matter (eg. within the law practice, to the Court, the other party or parties to litigation, to valuers, experts, barristers etc). H. Payment / Money on Account / Cost Gaps and Shortfalls in the amount recoverable compared to the amount paid or liable to be paid on your behalf We will ask you to repay the money paid on your behalf in clause 2.3 of our Costs Disclosure document. If we are unable to recover the total disbursements and other expenditures from the Defendant due to the operation of either the Civil Liability Act, Section 338 of the Legal Profession Act 2004, Schedule 1 of the Motor Accidents Compensation Regulation 2005 or the Workers Compensation Regulation 2003, which fix the maximum costs for legal services which may be recovered from the Defendant, then in such event you will be responsible to reimburse us on the successful completion of your matter. I. Authorisation to Transfer Money from Trust Account and Law Practice to Collect and Receive Money Due to the client and apply same to costs and disbursements due In consideration of our providing professional legal services to you at your request you hereby authorise and direct us: 1. To recover, collect and receive on your behalf and to pay directly into our trust account any judgement, verdict or settlement money, or money payable from any source, which becomes due and payable to you as a result of our carrying out your instructions and/or settling or otherwise resolving the matter pursuant to your instructions; and 2. To withdraw and pay to our office account from such funds such costs, expenses and disbursements as you shall at the time owe to us pursuant to this Costs Agreement, pursuant to section 261(1)(b) of the Act and as prescribed by the Legal Profession Regulation 2005, clause 88(3). You hereby acknowledge that:- • we will not act for you as your Solicitor unless you sign this Costs Agreement containing this clause, and • you fully understand the nature and consequences of your giving us this Authority and Direction, and • we have advised you to obtain independent legal advice before you sign this Costs Agreement containing this clause, and • we have a lien over the proceeds of such judgment, verdict or settlement money, or money from any source, for such costs, expenses and disbursements - which gives you a caveatable interest in my property or former property- and • this Authority and Direction is irrevocable without our consent in writing. J. Interpretation In this Agreement, words importing the singular number or plural number shall include the plural number and singular number respectively and words importing any gender shall include each other gender. K. No win - no fee & independent legal advice 1. We undertake this work for you on a no win - no fee basis: That is, if we do not obtain funds for you, we will not charge you any fees or expenses. The recovering of funds, money, or compensation in your favour by way of settlement, award, judgment, or trustee decision will require you to pay our professional costs as set out in the costs disclosure. 2. Upon the successful completion of your claim we will however charge the fees as set out in the Costs Discolsure. 3. You have a right to obtain independent legal advice before entering into this Conditional Cost Agreement. There is no requirement that you do so. Signed: Client Date Solicitor Date"
Mrs Pavlovic was also sent a costs disclosure, which was marked "Annexure A". I set out the text in full: "Annexure "A" Standard Costs Disclosure (Work Injury Damages) Date: 5 July 2012 To: Jadranka Pavlovic Address: This document discloses information about the costs of our legal services, and your rights, as required by the Legal Profession Act 2004 NSW (the Act). You may negotiate and enter into a costs agreement with us based on the information contained in this document. A standard costs agreement is attached. 1. GST All rates, charges, expenses etc in this document are GST exclusive unless otherwise stated. Where the service provided is subject to GST, GST of 10% will be added and charged to you. 2. Costs-how calculated 2.1 (a) an hourly rate of: $600.00 (plus 10% GST or $660.00 inclusive of GST) for a principal, partner, accredited specialist. (b) an hourly rate of: $500.00 (plus 10% GST or $550.00 inclusive of GST) for a senior litigation lawyer/accredited specialist. (c) an hourly rate of: $450.00 (plus 10% GST or $495,00 inclusive of GST) for a litigation lawyer. (d) an hourly rate of: $350.00 (plus 10% GST or $385.00 inclusive of GST) for a Para-legal/legal clerk. (e) an hourly rate of: $300.00 (plus 10% GST or $330.00 inclusive GST) for a administrative staff, which includes document production and account administration. (f) travelling time at the rate fixed by reference to the above hourly rates which are stated to inclusive of GST. These rates will be proportionately charged for work involving shorter periods less than an hour. Our charges are structured in 6 minutes units. For example, the time charged for an attendance of up to 6 minutes will be 6 minutes and the time charged for an attendance between 6 and 12 minutes will be rounded up to 12 minutes. 2.2 Charges We will charge you for services we use or supply, Our rates are: 2.2.1 photocopying: $.88 per page inclusive of GST) 2.2.2 faxes: $.88 per page inclusive of GST. 2.3 Expenses & Disbursements We will incur expenses and disbursements (being money which we pay or are liable to pay) to others on your behalf. These may include: Search fees; enquiry fees; court filing fees; process servers; clinical records from hospitals; medical reports; experts' reports; witnesses expenses; travel expenses, transcripts; barrister's fees. We will inform you of these expenses and disbursements as well as any other payments required to be made, as soon as is reasonably practicable or upon your request. 2.4 Expenses and disbursements incurred by our office Unless you instruct us in writing to the contrary, or we ask you to pay an expense or disbursement to commence your case, expenses and disbursements will be paid by use of an office account with an overdraft facility and at the conclusion of the matter, interest will be payable calculated monthly on the amount outstanding at the end of each month at the rate of nine percent (6.25%) per annum. 3. Estimate of Costs It is not possible at this time to provide an accurate estimate of the total costs in relation to your claim for personal injury damages. Instead a range of estimates is provided as follows based upon an assessment of damages recoverable and our estimate of the fee, which could be charged: 3.1 Damages 0 • $50,000 $50,000 • $150,000 $150,000 • $400,000 $400,000 • $750,000 $750,000 • $1,000,000 $1,000,000 and over Costs (exclusive of GST) $10,000 to $25,000 $25,000 to $45,000 $45,000 to $175,000 $175,000 to $250,000 $250,000 to $350,000 $350,000 to $500,000 These estimates are made on the information available to us at this time. They may and probably will, change when more information is available to us. The major factors which affect this estimate are: 3.1.1The insurer wholly denies liability or contests liability or alleges that you were at least 25% at fault. 3.1.2 The insurer alleges that the claim is fraudulent or you lack capacity. 3.1.3 The number of interlocutory applications. 3.1.4 The number and location of witnesses and other forensic matters which may require investigation. 3.1.6 Change in the length of trial. 3.1.6 The matter proceeds to an Appeal following Judgment and Verdict of the Court, 3.1.7 The complexity of the matter. 3.1.8 you may, throughout the duration of your claim, request an estimate of the amount of costs and disbursements that you have incurred and an estimate of the amount that you are likely to incur in order to finalise your claim. Such estimate is required to be provided by us within 21 days from the date of your request. 4. Our Right to lodge a Caveat for unpaid fees In the event of your default in payment by the due date of the amount shown as due and payable in a bill of costs which we give or serve on you in accordance with this Agreement, we may lodge a Caveat against the title to real property of which you are registered as proprietor or co-proprietor. By signing this Agreement, you acknowledge that we advised you to obtain independent legal advice in respect of this clause before you signed this Agreement. 5. Unusual Expenses in Court Proceedings If it becomes necessary for us to incur in your interests an unusual expense which may not be recoverable from the other party or parties on a "party and party" costs assessment, such as the retainer of an agent, senior counsel's fees, valuers' fees, the cost of forensic accountancy services, or the cost of an independent computer forensic analysis, we will before doing so advise you by letter the details of any such unusual expense and request your authority in writing for us to incur the expense on your behalf. 6. The need to establish "reasonable prospects of success". By signing our Costs Agreement to which this document is Annexure "A", you agree that you will, before we commence proceedings on your behalf, provide us with sufficient instructions (including relevant materials) to enable us to form the view that, on the basis of provable facts and a reasonably arguable view of the law, your claim for damages has reasonable prospects of success. If, at any time after you have signed our Costs Agreement:- • you do not provide us with such instructions, or • we investigate your claim, or • counsel advises us that your claim does not have reasonable prospects of success and we change our view, then in any of such cases we shall be entitled to terminate our Costs Agreement with you in accordance with clause E of the Agreement. 8. Offer of Compromise - section 340 of the Act and clause 117 of the Legal Profession Regulation 2005 If an offer of compromise is made by the other party, we .shall, as the law requires of us, provide you with the following information to enable you to consider such offer:- (a) the terms of the offer (or a summary of them) when we notify you that the offer has been made, and (b) our view as to the reasonableness of the offer, and (c) your position in the proceedings if you were to decline to accept a reasonable offer of compromise, namely, that the court may award to the party who made the offer costs on an indemnity basis after the offer is made, and (d) if you reject the offer, if we and/or counsel regard it as reasonable , the specific effect which the rejection will have on the interests of the parties to the proceedings. This information will be given to you by letter as soon as practicable after the offer is made, and before we convey the instructions which you give us to the other party or the court. 9. The Firm's Responsibilities to you The Firm shall represent and act for you in what it considers to be your best Interests and conduct the matter in a competent and diligent manner observing ethical standards and complying with the law for the time being in force which regulates the legal profession in the State of New South Wales. 10. Your right to a bill of costs You are entitled to receive a bill of costs from us. If we send you a lump sum bill you may request an itemised bill from us. 11. Billing arrangements We will send you a bill of costs containing information of our professional fees and charges, disbursements and expenses, including GST, either after completion of the work, or monthly, or at other times as agreed with you, when the work is in progress. 12. Interest on overdue legal costs (Legal Profession Act 2004 Section 321(2)) If you do not pay the legal costs due to us within 30 days of your receipt of our bill of costs, we may charge you interest on the outstanding costs as at the maximum rate which the law entitles us to charge until the amount due to us has been paid in full. At the date of this Costs Agreement, the rate is 6.25% but this rate may change by the time we issue our bill of costs to you. (The charging of Interest is authorised by section 321 of the Legal Profession Act 2004 and the rate is prescribed by clause 110A of the Legal Profession Regulation 2005). (Our bill of costs will contain a statement that interest is payable and the rate of interest, as section 321 (3) of the Legal Profess/on Act 2004 requires). 13. Your statutory rights in relation to legal costs You have the right Linder the law to: • Negotiate a Costs Agreement with us; • Receive a bill of costs from us; • Request an itemised bill of cost after you receive a lump sum bill from us; • Request a written report about the progress of your matter and the costs incurred in your matter; • Apply for costs to be assessed within 12 months if you are unhappy with our costs; • Apply for the Costs Agreement to be set aside; • Refer a costs dispute about the bill for mediation is the amount in dispute is less than $10,000; • Accept or reject any offer we make for an interstate costs law to apply to your matter; • Notify us that you require an interstate costs law to apply to your matter, For more information on this topic you can refer to the fact sheet titled "Legal Costs - Your Right to Know". You can ask us for a copy or obtain it from the website of the Law Society of NSW Sydney at . 14. Persons responsible for your matter and legal costs Zacharia Gabriel will be responsible for your matter, You may contact Zacharia Gabriel regarding your matter and your legal costs, 15. Substantial changes to disclosure You will be informed, as soon as is reasonably practicable, of any substantial changes to anything contained in this disclosure document. 16. Progress reports You are entitled to request, at reasonable intervals, written progress reports on your matter. Our normal charge-out rates will apply for this service, You are entitled to request a written report on the legal costs incurred to date since the last bill of costs was given to you, free of charge, 17. Engagement of another law practice It may be necessary for us to engage, on your behalf, the services of another law practice to provide specialist advice or services, including advocacy services, or to act as our agent. We will consult you as to the terms of that law practice's engagement, but you may be asked to enter into a costs agreement directly with that law practice. The law practice engaged by us will disclose costs in a similar manner and we will disclose those costs to you, 18. Costs in court proceedings 18.1 If court proceedings are taken on your behalf, the court may order the other party to pay your costs of the proceedings. This sum will not necessarily cover the whole of your legal costs and disbursements due to us. You may be responsible for disbursements not recoverable from the other party. It is possible that the court may make an order that you pay the other party's costs (If, for instance, you lose the case). These costs and disbursements are payable by you to the other party in addition to the costs and disbursements payable to us. 18.2 If you are successful in the litigation the costs that may be recovered from the other party will depend upon whether or not the amount recovered in your claim exceeds $100,000.00, if your claim does not exceed $100,000.00 then costs will continue to be regulated by the Civil Liability Act which provides the maximum amount that can be recovered from the Defendant insurer. We refer you to paragraph 7 above. If the amount recovered in your claim does exceed $100,000.00 then the Civil Liability Act does not apply with respect to costs. The amount of costs that may be recovered in this instance will be by reference to the estimate provided in paragraph 3.1. relating to the assessment of our own costs. It is not possible to provide an accurate estimate as the amount recoverable will be wholly dependent upon the amount of work which has been done on a party/party basis, that is, work generated by necessary communications between ourselves and the defendant/insurer, excluding work generated by communications directly with yourself which are classified as solicitor/client costs. 18.3 If you are unsuccessful in the litigation you may be ordered to pay the other party's costs. The sums given below are merely estimates, and based on our estimate of what the other party's law practice may charge. 17.3,1 prior to hearing: $15,000 to $30,000 17.3.2 up to and including a single day's hearing: $25,000 to $50,000 17.3.3 up to and including three days' hearing: $45,000 to $80,000 17.3.4 up to and including five days hearing: $60,000 to $100,000 18.4 If settlement of your claim is being negotiated, we will provide you before settlement with: 18.4.1 a reasonable estimate of our costs and disbursements payable by you on settlement; AND 18.4.2 a reasonable estimate of the costs and disbursements you are likely to obtain from the other party on settlement if the settlement is favourable to you; 19. Applicable law The law of NSW applies to legal costs regarding this matter. You are, however, able to enter into a costs agreement with us on the basis that the corresponding law of another State or Territory is applicable if this matter has a substantial connection with that Stale or Territory. In that event, we will disclose costs as they are applicable in that State or Territory. You have the right to contract with us that the costs assessment scheme. In NSW is applicable, in the event of any dispute as to costs arising with us."
The third document provided to Mrs Pavlovic, which was headed "Annexure B", was as follows: "Annexure "B" Disclosure pursuant to Schedule 7 of the Workers Compensation Regulation 2010 (NSW) (Work Injury Damages Claim) Date: 5 July 2012 To: Jadranka Pavlovic Address: 1. The Legal Profession Act 2010 and Schedule 7 of the Workers Compensation Regulation 2010 would, but for our costs agreement, limit the maximum costs for the legal services which we provide to you in connection with your claim for work injury damages claim. The maximum costs for legal services are contained in the Workers Compensation Regulation 2010 (Schedule 7). These regulations provide a scale which contains a maximum costs for legal services which are recoverable depending upon the value of the claim upon settlement or judgment. 2. Our costs agreement excludes such maximum costs otherwise applicable and we charge costs that are in excess of Schedule 7 of the Workers Compensation Regulation 2010 (NSW). 3. Our costs of acting for you in connection with your claim will be calculated as set out in clauses 2, 3 and 12 of our "Standard Cost Disclosure" annexed to the Costs Agreement. 4. Even If costs are awarded by the Commission or court in your favour or the workers compensation insurer or Defendant company agrees to pay costs in your favour, you will be liable to pay such amount of the costs provided for in the costs agreement as exceeds the amount that would be payable under Schedule 7 of the Workers Compensation Regulation 2010, in the absence of a costs agreement."
Ms Pavlovic understood that her task was to read and sign the costs documentation and then to return it. Her evidence is that she read through the document but did not fully understand it, but nevertheless signed at the bottom of each page on the dotted line and returned it to the defendant's office. The costs agreement was countersigned by Mr Gabriel on 18 September 2014, as were Annexures A and B.
It is common ground that the documents were stapled together and put into the same envelope.
The following may be observed as to the formatting of the documents: 1. The same material in terms of date and addressee appear at the commencement of each of the three documents. 2. There is no indication as to which of the documents should be read first, but in practical terms, since the standard costs agreement was at the top of the bundle and the other two documents are described as annexures, the likelihood is that the costs agreement would be read first, as opposed to the documents headed "A" and "B".
There was a covering letter containing these documents. I raised its absence with the parties, and there appears to be a concession that a letter in similar form to that sent to Mr Stjepanovic was sent. I propose to assume that Mrs Pavlovic received some form of covering letter of a standard nature similar to that received by Mr Stjepanovic.

[6]

Mr Stjepanovic's costs agreement documentation

Mr Stjepanovic, like Mrs Pavlovic, is a native speaker of Serbian and, like her, gave evidence through an interpreter.
Mr Stjepanovic was injured in a motor vehicle accident and not at work. He was, however, sent identical costs agreement documentation. The disclosure was in very similar terms, with the only difference of substance being the reference to Reg 11 of the Motor Accidents Compensation Regulation.
Mr Stjepanovic received a covering letter. The text was as follows: "21 November 2012 Mr J Stjepanovic [Address Redacted] Dear Mr Stjepanovic Your Motor Vehicle Accident Claim Date of accident: Thursday, 25 October 2012 We refer to the above matter. The Legal Profession Act 2004 and Legal Profession Regulation 2005 require us to disclose our costs to you and to enter into a Costs Agreement in order to carry out the legal services which we have been retained for by you. It is important that you read both of the enclosed documents carefully and that you have understood them. Once you have read these documents would you kindly sign the costs agreement where indicated, on the last page. The signed document should then be returned to our office whereupon we shall continue to act upon you behalf. We should be more than happy to explain the contents of documents, should you have any questions. In that regard, should you wish to discuss the contents of any of these documents then please do not hesitate to contact our Mr Petrovich. Yours faithfully nsw compensation lawyers"
The key words in this covering letter are "both" and "them". Mr Stjepanovic was on notice that there was more than one document in the envelope. (I have made this assumption in relation to Mrs Pavlovic as well, on the assumption that the missing covering letter would have been in similar terms).
The first document is headed "Standard Costs Agreement (Motor Accident Claim)" and opens with the words: "This document is an offer to enter into a costs agreement with you": "Standard Costs Agreement (Motor Accident Claim) Date: 21 November 2012 To: Josip Stjepanovic Address: [Address Redacted] A. This document is an offer to enter into a costs agreement with you."
I will not set out the rest of the document as it is essentially in the same form as Mrs Pavlovic's document.
There were two documents attached. The first of these was the Standard Costs Disclosure, which was headed "Annexure A". This document opens with the explanation that it discloses information, as required by the Act, about negotiating the "standard costs agreement" that is "attached". The opening section is as follows: "Annexure "A" Standard Costs Disclosure (Work Injury Damages) Date: 21 November 2012 To: Josip Stjepanovic Address: [Address Redacted] This document discloses information about the costs of our legal services, and your rights, as required by the Legal Profession Act 2004 NSW (the Act). You may negotiate and enter into a costs agreement with us based on the information contained in this document. A standard costs agreement is attached."
I shall not set out the balance of the document, as it is essentially the same as that sent to Mrs Pavlovic.
The third document, headed "Annexure B", tells Mr Stjepanovic that, "prior to entering into the cost agreement with us", the solicitors advise him of his entitlement to limits on maximum costs for legal services and that the amount of costs that the solicitors charge "exceeds that amount". The full text is as follows: "Annexure "B" Disclosure pursuant to Regulation 11 of the Motor Accidents Compensation Regulation 2005 (NSW) (Motor Accident Claim) Date: 12 November 2012 To: Josip Stjepanovic Address: [Address Redacted] 1. Pursuant to Regulation 9 of the Motor Accidents Compensation Regulation 2005, prior to entering into the cost agreement with us, we advise you that even if a costs assessor or a court or a judge awards costs in your favour, you will still be liable to pay such amount of the costs provided for in the costs agreement that exceeds the amount that would ordinarily be payable under the Motor Accidents Compensation Act 1999 (NSW) and/or the Motor Accidents Compensation Regulation 2005 (NSW), in the absence of such a costs agreement. 2. The Legal Profession Act 2004 and the Motor Accidents Compensation Regulation 2005 (NSW) would limit the maximum costs for legal services which we provide to you in connection with your motor vehicle accident claim. The amount of costs that we charge exceeds that amount. 3. In signing this document, you understand and acknowledge that, should you win your case, the costs recoverable from the insurance company will be, less than the legal costs that we charge. 4. You acknowledge by signing this document the costs· charged to you will be in accordance with the Conditional Costs Agreement that you have signed and that you are responsible to pay the gap between the costs otherwise recoverable from the insurer under schedule 1 of the Motor Accidents Regulation 2005 and the costs payable under the costs agreement. The insurer will not pay this amount and this amount will be payable by you from the compensation that you receive."
Although the statutory regimes for these differently arising accidents are different, the requirements concerning notification are identical.

[7]

The relevant statutory provisions for workplace injury proceedings

Reg 98 of the Workers Compensation Regulations 2010 provides: "Maximum costs recoverable 98 Maximum costs recoverable (1) The costs that are recoverable, and the maximum costs that are recoverable, for: (a) legal services or agent services provided in or in relation to a claim for compensation, and (b) matters that are not legal or agent services but are related to a claim for compensation, are the costs set out in Schedule 6, except as otherwise provided by this Part. Note : The effect of this clause is that a legal practitioner or agent cannot recover any costs in relation to a claim for compensation unless those costs are set out in Schedule 6, except as otherwise provided in this Part. (2) If there is a change in the legal practitioner or agent retained by a party in or in relation to a claim made or to be made for compensation, the relevant costs are to be apportioned between the legal practitioners or agents concerned. (3) If there is a dispute as to such an apportionment, either legal practitioner or agent concerned (or the client) may refer the dispute to the Registrar for determination. (4) A legal practitioner or agent has the same right of appeal against a determination made under subclause (3) as the legal practitioner or agent would have under clause 135 if the determination were a determination made by the Registrar in relation to a bill of costs. Note : Division 3 of Part 3.2 of the Legal Profession Act 2004 requires barristers and solicitors, before providing any legal services to a client, to provide the client with a written disclosure of the basis of the costs (or an estimate of the likely costs) of legal services concerned."
Reg 103 of the Workers Compensation Regulations 2010 provides as follows: "103 Contracting out--practitioner/client costs (1) This clause applies in respect of costs in or in relation to a claim for work injury damages if a legal practitioner: (a) makes a disclosure under Division 3 of Part 3.2 of the Legal Profession Act 2004 (sections 312 and 317 excepted) to a party to the matter with respect to the costs, and (b) enters into a costs agreement (other than a conditional costs agreement, within the meaning of that Division of that Part, that provides for the payment of a premium of more than 10% of the costs otherwise payable under the agreement on the successful outcome of the matter concerned) with that party as to those costs in accordance with Division 5 of that Part, and (c) before entering into the costs agreement, advises the party (in a separate written document) that, even if costs are awarded in favour of the party, the party will be liable to pay such amount of the costs provided for in the costs agreement as exceeds the amount that would be payable under the 1998 Act in the absence of a costs agreement. (2) Schedule 7 does not apply to the costs concerned to the extent that they are payable on a practitioner and client basis."
Claims for injuries sustained in work accidents have always existed in a strict legislative context. Under the Motor Accidents Compensation Act 1999 (NSW) and the Workers Compensation Regulations 2010, a person injured at work is entitled to make a claim for statutory benefits, namely weekly payments and lump-sum benefits based on the degree of whole person impairment, and can only seek work injury damages if the worker's whole person impairment exceeds 15%. The worker must then establish negligence on the part of an employer. There are also requirements for service of all medical reports and other economic loss documentation, which must be provided with the Pre-Filing Statement (in the case of the plaintiff) or defence (in the case of the defendant).

[8]

The relevant statutory provisions for motor accident claims

Reg 11 of the Motor Accidents Compensation Regulations 2005 provides: "11 Contracting out--solicitor/client costs (1) This clause applies in respect of costs in a motor accidents matter if a legal practitioner: (a) makes a disclosure under Division 2 of Part 11 of the Legal Profession Act 1987 (sections 180 and 181 excepted) to a party to the matter with respect to the costs, and (b) enters into a costs agreement (other than a conditional costs agreement, within the meaning of that Part, that provides for the payment of a premium on the successful outcome of the matter concerned) with that party as to those costs in accordance with Division 3 of that Part, and (c) before entering into the costs agreement, advises the party (in a separate written document) that, even if costs are awarded in favour of the party, the party will be liable to pay such amount of the costs provided for in the costs agreement as exceeds the amount that would be payable under the Act in the absence of a costs agreement. (2) Schedule 1 does not apply to the costs concerned to the extent that they are payable on a solicitor and client basis."
Resolution of claims for personal injury arising out of a motor vehicle accident is contained in a series of specific provisions in the Motor Accidents Compensation Act 1999 ("MAC Act") and the Motor Accident Compensation Regulation 2005 (NSW) ("MAC Regulation"). The chief difference between this statutory regime and that which is applicable to work injury relates to the approach to damages and the manner in which a claim of permanent impairment is assessed and a different system for the resolution of claims as an alternative to court proceedings.
The claim brought by Mr Stjepanovic was a simple one. Past and future economic loss could not be claimed as he was retired.
Costs in motor accident matters are regulated as follows: 1. Party/party costs are in part regulated and in part unregulated (the unregulated aspect subject to being fair and reasonable); 2. The professional costs component of legal costs is regulated by a scale (now Schedule 1 of the MAC Regulation), to which GST can be added; 3. The scale allows amounts for professional costs based partly on the stage at which the matter was resolved and partly on the value of the final amount (settled or determined by CARS); 4. Some disbursements, such as medical reports, are regulated by the imposition of a fixed amount (Schedule 2); 5. Other disbursements are unregulated, some expressly - by being expressly exempted - and others impliedly, by not being limited to a maximum amount; 6. Solicitor/client costs are regulated differently: a solicitor and client could agree that the regulated professional costs would not apply (referred to as "contracting out"); 7. Unregulated costs fall to be determined by the ordinary rules in relation to legal costs provided for under the Act, ie, essentially whether they were "fair and reasonable"; 8. To be effective under Reg 11 of the MAC Regulation, the contracting out required the Defendant (relevantly to this matter) to: 1. Make a disclosure under the Act to the client with respect to the costs; 2. Enter into a costs agreement; 3. Before entering into the costs agreement, advise the client in a separate written document that even if costs are awarded in favour of the client, the party will be liable to pay such amount of the costs provided for in the costs agreement that exceeds the amount that would be payable under the MAC Act in the absence of a costs agreement.

[9]

The relevant disclosure provisions in the Legal Profession Act

Part 3.2 of the Act sets out, in Division 3, the relevant provisions for costs disclosure.
Section 309 provides: 309 Disclosure of costs to clients (1) A law practice must disclose to a client in accordance with this Division: (a) the basis on which legal costs will be calculated, including whether a fixed costs provision applies to any of the legal costs, and (b) the client's right to: (i) negotiate a costs agreement with the law practice, and (ii) receive a bill from the law practice, and (iii) request an itemised bill after receipt of a lump sum bill, and (iv) be notified under section 316 of any substantial change to the matters disclosed under this section, and (c) an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs, and (d) details of the intervals (if any) at which the client will be billed, and (e) the rate of interest (if any), whether a specific rate or a benchmark rate, that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest (as referred to in subsection (1A)), and (f) if the matter is a litigious matter, an estimate of: (i) the range of costs that may be recovered if the client is successful in the litigation, and (ii) the range of costs the client may be ordered to pay if the client is unsuccessful, and (g) the client's right to progress reports in accordance with section 318, and (h) details of the person whom the client may contact to discuss the legal costs, and (i) the following avenues that are open to the client in the event of a dispute in relation to legal costs: (i) costs assessment under Division 11, (ii) the setting aside of a costs agreement or a provision of a costs agreement under section 328 (Setting aside costs agreements or provisions of costs agreements), (iii) mediation under Division 8, and (j) any time limits that apply to the taking of any action referred to in paragraph (i), and (k) that the law of this jurisdiction applies to legal costs in relation to the matter, and (l) information about the client's right: (i) to accept under a corresponding law a written offer to enter into an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter, or (ii) to notify under a corresponding law (and within the time allowed by the corresponding law) the law practice in writing that the client requires the corresponding provisions of the corresponding law to apply to the matter. Note - The client's right to sign an agreement or give a notification as mentioned in paragraph (l) will be under provisions of the law of the other jurisdiction that correspond to section 304 (Part also applies by agreement or at client's election). (1A) For the purposes of subsection (1) (e), a benchmark rate of interest is a rate of interest for the time being equal to or calculated by reference to a rate of interest that is specified or determined from time to time by an ADI or another body or organisation, or by or under other legislation, and that is publicly available. (1B) The regulations may make provision for or with respect to the use of benchmark rates of interest, and in particular for or with respect to permitting, regulating or preventing the use of particular benchmark rates or particular kinds of benchmark rates. (2) For the purposes of subsection (1) (f), the disclosure must include: (a) a statement that an order by a court for the payment of costs in favour of the client will not necessarily cover the whole of the client's legal costs, and (b) if applicable, a statement that disbursements may be payable by the client even if the client enters a conditional costs agreement. (3)A law practice may disclose any or all of the details referred to in subsection (1) (b) (i)-(iii), (g), (i), (j) and (l) in or to the effect of a form prescribed by the regulations for the purposes of this subsection, and if it does so at the time the other details are disclosed as required by this section the practice is taken to have complied with this section in relation to the details so disclosed.
Section 311 also provides how and when disclosure is to be made: 311 How and when must disclosure be made to a client? (1) Disclosure under section 309 must be made in writing before, or as soon as practicable after, the law practice is retained in the matter. (2) Disclosure under section 310 (1) must be made in writing before, or as soon as practicable after, the other law practice is retained. (3) Disclosure made to a person before the law practice is retained in a matter is taken to be disclosure to the person as a client for the purposes of sections 309 and 310.
The consequences of failure to disclose are set out in section 317 and I will not repeat them.
Section 322 provides: 322 Making costs agreements (1) A costs agreement may be made: (a) between a client and a law practice retained by the client, or (b) between a client and a law practice retained on behalf of the client by another law practice, or (c) between a law practice and another law practice that retained that law practice on behalf of a client, or (d) between a law practice and an associated third party payer. (2) A costs agreement must be written or evidenced in writing. (3) A costs agreement may consist of a written offer in accordance with subsection (4) that is accepted in writing or by other conduct. Note - Acceptance by other conduct is not permitted for conditional costs agreements - see section 323 (3) (c) (i). (4) The offer must clearly state: (a) that it is an offer to enter into a costs agreement, and (b) that the client may accept it in writing or by other conduct, and (c) the type of conduct that will constitute acceptance. (5) Except as provided by section 395A, a costs agreement cannot provide that the legal costs to which it relates are not subject to costs assessment under Division 11. Note - If it attempts to do so, the costs agreement will be void - see section 327 (1). (6) A reference in section 328 and in any prescribed provisions of this Part to a client is, in relation to a costs agreement that is entered into between a law practice and an associated third party payer as referred to in subsection (1) (d) and to which a client of the law practice is not a party, a reference to the associated third party payer.

[10]

The interpretation of the legislation

As Mr Morris SC and Ms Castle set out in their submissions (at [52] ff), interpretation of the Act and Regulations must begin with the text itself, in terms of being a balancing exercise between the competing interests of consumer protection and the provision of legal services to the public. The relevant principles of law are helpfully set out, as well as applied to the relevant principles concerning costs, by Walton J in Malvina Park Pty Ltd v Johnson [2019] NSWSC 1490 at [61] - [63].
Although Mr Baran described reg 103(c) as "a consumer protection provision, axiomatically" (T 62), the legislation in fact reflects a negotiated compromise position where the legislative solution was to permit solicitors and clients to negotiate so as to permit the solicitor to continue to charge without being fettered by statutory limitations, provided there was a disclosure, prior to the agreement being entered into, of the client's right to refuse an agreement which allowed the charging of the additional fees
These competing purposes underlying the legislation, evident from their language and structure, must be interpreted with these purposes in mind: see the discussion of Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 as set out in Malvina Park Pty Ltd v Johnson at [61] - [63] in relation to legal costs issues. The starting point for ascertaining the meaning of a statutory provision is the text of the provision in light of its context and purpose.
In these circumstances, the consumer protection aspect of the legislation is tempered by the knowledge that these are commercial arrangements designed to enable both parties to arrange their affairs and utilise their resources knowing that their potential liabilities are reasonably determinable, having regard to the obligations under the agreement entered into. For example, courts must take into account economies of scale, such as the need for solicitors to manage their offices and overheads efficiently in terms of communication with clients. Mr Morris SC referred to one such example when adverting to the "failsafe" of sending the disclosure document at the same time as the costs agreement and physically attaching it, not only so that the client could consider one document in light of the other, but so the solicitor has proof that the relevant disclosure was in fact put before the client.
Central to these issues is the concept of disclosure obligations and what sort of conduct by solicitors these obligations entail. (It is not in dispute that the Act is the legislation governing these obligations; although the MAC Regulation refers to the Legal Profession Act 1987 (NSW), pursuant to s 68(3) of the Interpretation Act 1987 (NSW), the 2004 Act is applicable).
The obligations the subject of this judgment form part of Part 3.2 of the Act and, in particular, Division 3, "Costs Disclosure". Division 3 requires a law practice to disclose a series of facts to a client ranging from the costs to be charged (including an estimate of total legal costs) to information where a settlement is being negotiated. Division 3 not only provides how and when disclosure must be made but sets out the consequences of any failure to disclose.
The challenge to the disclosures in each of these proceedings is made on narrow grounds. There is no argument that the disclosure was not made, or that it was inadequately drafted, or that the costs agreement is void (although a challenge to the Estimate of Costs is noted and discussed below). The challenge is to the timing and manner in which the disclosures in question were effected. These challenges are, as noted at the commencement of this judgment, that the disclosures were not "separate" documents from the costs agreements, and that they were not provided "before" the plaintiffs accepted, and entered into, the costs agreements.

[12]

"Separate"

Mr Baran submits that the disclosure in each case is not "separate" because: 1. The disclosure is described as an annexure. 2. The disclosure was stapled to the costs agreement. 3. The disclosure was placed in the same envelope as the costs agreement. 4. In those circumstances, the disclosure is incorporated into the costs agreement and becomes a part of it.
Mr Morris SC submits, in each case, that the document is "separate" for the following reasons: 1. The covering letter (assuming one was sent in both cases) advises each of the plaintiffs to "read both of the enclosed documents carefully" and stresses it is important "that you have understood them" (emphasis added). The reader is immediately put on notice by this language that there is more than one document enclosed. 2. Each of the two enclosed documents is clearly identified, in simple language, as being the costs agreement and the disclosure which must be made "prior to entering into the costs agreement with us" (emphasis added). 3. The paragraphs which comprise the disclosure have not been absorbed into, or copied and pasted into, the standard costs agreement, and do not form any part of it.
Whether one document is separate from another is a question to be approached by construction of the documents, rather than the presence or absence of a staple, as Ward J (as her Honour then was) noted in Sapphire (SA) Pty Ltd (trading as River City Grain) v Barry Smith Grains Pty Ltd (in liq) [2011] NSWSC 1451 at [75], citing Pearl Marin Shipping A/B v Pietro Cingolani SAS, The General Valdes [1981] 1 Lloyd's Rep 170 ("Pearl Marin") and explaining the "critical question" as being one of intention of the letter writer.
The facts in Pearl Marin, the decision endorsed by Ward J, were as follows. An umpire posted the Award that he had made to the parties in the same envelope as another document, headed 'Reasons for Award'. The documents were not stapled together, there was no covering letter and, significantly, the document headed 'Reasons for Award' did not contain the usual disclaimer that the reasons given formed no part of the Award. The document headed 'Reasons for Award' contained, on the face of it, an error of law and the question arose whether that document (and its error) therefore formed part of the Award.
The Court held that reasons for the Award were incorporated into the Award. Despite the fact that the documents were not stapled together, and that there was no reference to the reasons in the Award, the fact of their being issued together, and (critically, for this case) the failure of the umpire to insert the usual disclaimer in the reasons, meant that it had to be taken that the umpire intended to invite the parties to read his written reasons for the Award as part of the Award.
The critical question was the intention of the umpire which, for the reasons explained by Ward J, meant that the intention must be gleaned from the documents themselves. The contents of the document, not the manner of their affixation and/or inclusion in the envelope, were the key.
In the present case, while the documents were sent in the same envelope, the covering letter (which clearly refers to two documents) as well as the contents of the documents themselves each, and all, confirm that these are separate documents.
There is no requirement in the legislation that the documents must be provided at a separate time in order to be "separate". The term "separate" means that the document cannot be incorporated into the costs agreement, not that the two documents cannot be provided at the same time. The presence (or absence) of a staple makes no difference.
Nor is there a requirement for each of the plaintiffs to have read the disclosure in its entirety before reading the costs agreement. The requirement for the documents to be considered "separately" would not preclude either of the plaintiffs from reading part of one document and then referring to the other, or using combinations of the two sources of information in order to understand the contents of the documents. The phrase "considered separately" was interpreted as permitting such combinations of sources of information in AstraZeneca AB v Apotex Pty Ltd [2015] HCA 30; 257 CLR 356 at [20] - [21]. The documents do not lose their "separate" quality from being provided (even stapled) together and read, in part or in whole, at the same time.
I am satisfied that the documents were provided separately.

[13]

"Before"

Mr Baran's submissions assert that the "separate" legal document must be "sent before setting out the language of the Regulation" (outline of submissions, paragraph 13), citing Ji v Firth t/as Firths the Compensation Lawyers [2013] NSWSC 186 at [5] - [8] ("Ji v Firth"). In each case, the document was not "sent" before, but at the same time, which Mr Baran submitted could not be "before" entering into the costs agreement.
There are two problems with these submissions. First, implicit in Mr Baran's use of the words "sent before" is that there is an expectation of providing the document separately (which I have rejected: see above), as well as beforehand. Second, Ji v Firth does not support the contentions for which it is cited; these paragraphs of the judgment are essentially a statement of the obligations in question. Additionally, the judgment can be distinguished on the facts. In Ji v Firth, although the legal practice positively averred that a disclosure was sent separate document complying with the notice requirement of reg 103 of the Regulation was served on the client on 10th February 2011, that document was not disclosed in evidence to the court, nor was its creation referred to in the itemised bill served in response. (This was because the legal practice conceded that the costs agreement was void by dint of ss.323 and 327 of the 2004 Act; paragraph (b) of subclause 103(1) of the Regulation was not satisfied, and accordingly there is no entitlement to charge practitioner and client costs in respect of the claim for work injury damages, regardless of notice.) The issue for determination here was simply not canvassed at all.
What does "before" mean? The identical terms in the relevant provisions of each of the Workers Compensation Regulations and the Motor Accident Compensation Regulations refer to "before" as being "before entering into the costs agreement". On general principles of offer and acceptance, "before" means at any time before the offer is accepted. It does not mean "before" reading the costs agreement prior to signing and accepting it.
As noted above, the letter to each of the plaintiffs contains an offer to enter into a costs agreement. Instructions are given in the covering letter to read the two documents carefully before signing. On the assumption that these instructions are followed, it does not matter in which order each of the plaintiffs read the documentation; if they followed the instructions to read before signing, the information required by each of the Regulations must have been read before the offer is accepted by signing and returning the costs agreement.
The practicality of sending the two documents to be read at the same time is clear, because each explains the other. I have accepted Mr Morris SC's submission that collating and presenting the two documents in this fashion was a "failsafe" mechanism for ensuring that a client could not deny being given the necessary disclosure, because it was not merely included with, but physically attached to, the costs agreement to which it applied.
Mr Baran submitted that the failure of the defendant to call evidence from the solicitors with conduct of the matter to give evidence of the commercial practicalities adverted to by Mr Morris SC should result in a Jones v Dunkel inference being drawn (T 62). However, their evidence would have added nothing and I decline to draw the inference.
Mr Baran also challenged the fairness of sending the two documents at the same time, in that each of the plaintiffs was presented with a fait accompli. In terms of fairness (consumer protection being emphasised by Mr Baran), the presentation of these two documents at the same time is arguably preferable to a solicitor technically complying with the Regulations by providing the disclosure on, for example, the first visit, but providing the costs agreement separately some time later, with no indication of the connection between the two. There would be technical compliance with "separately" and "before", but the client would not be alerted to the connection between the two. I accordingly reject the submission of unfairness.

[15]

The disclosures in the costs agreements

The plaintiffs submit that the defendant did not comply with the disclosure provisions in the Act. The question is whether the defendant entered into a costs agreement in accordance with appropriate disclosures.
The Disclosure Provisions tables provided by the defendant in the Court Book carefully set out how there has been compliance with each of the disclosure provisions in ss 309, 313, 322 of the Act. I am satisfied that each of the disclosure requirements of the Act is satisfied by the costs agreement (no challenge was taken to the omission of a provision about mediation in one of the costs agreements).
Mr Baran essentially only challenged paragraph 3 of the two costs agreements, which stated that it was "impossible" to give a costs estimate, and provided a table which was a sliding scale of likely costs, depending on the amount of damages (this is followed by a list of potential variables for such figures), referring to Frontier Law Group Pty Ltd v Robert Glenn Barkman at [38], where Slattery J described a similar disclosure clause in a costs agreement as "incomprehensible": "Secondly, even if one were to assume the costs agreement before the Court is the one that applies to the legal services for which the solicitor's charges have been claimed, the disclosure contained in the costs agreement is, in my view, incomprehensible. The costs agreement takes the extraordinary step of providing a "total estimate of costs and disbursements" in a purported attempt to comply with s 174(1) (see Legal Profession Act, s 309(c)) by asserting that the total legal costs will be "between $2,200 - $55,000". In other words, the upper limit of the amount claimed is more than twenty times the lower limit. In my view, that is on its face, so wide a range as to provide no guidance to any client and is not, on any rational basis to be described as an "estimate of the total legal costs" that complies with the legislation."
The proceedings before Slattery J related to an application for removal of a caveat purported to be lodged for fees due pursuant to a costs agreement. It is evident from his Honour's description of this document (at [34] - [40]) that there had been a total failure to provide any disclosures, of which the reference to the legal costs as being between the two sums identified at [38] was but one example.
The offending few words for the "total estimate" in the costs agreement put before Slattery J are wholly different from the provisions in these costs agreements, which are set out in several paragraphs consisting of two-thirds of a page, listing likely scenarios in terms of the relationship between the damages and the costs as well as the factors that could increase or otherwise vary those costs.
Mr Morris SC submitted that paragraph 3 painted a picture of likely results of the kind which was particularly germane to personal injury claims, where solicitors may cut their cloth to tailor the result where a modest amount of damages are involved. This was in fact the case for Mr Stjepanovic, in that the costs incurred were reduced by reason of the modest amount of damages he was awarded.
Mr Baran submitted that what should have appeared was an assessment of the damages the parties were likely to receive; for example, Mrs Pavlovic was over the threshold at 16% and a calculation could have been done on that basis.
I consider that to be a counsel of perfection. A costs agreement is not a place for an advice on quantum. At the commencement of litigation, most of the variables relevant to damages are yet to be determined. In those circumstances, giving a general guide to a client, in terms of percentages of damages and risks that may vary those figures, is in my view sufficient to comply.
I am satisfied that the costs agreements for both plaintiffs contain all the appropriate disclosures under the Act.

[19]

The unjust enrichment/change of position argument

The three elements of an unjust enrichment claim are that the defendant received a benefit, which must be "unjust" in a legal sense, and made at the plaintiff's expense. Unjust enrichment is "not a definitive legal principle according to its own terms" (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [151]); it depends on the existence of a qualifying or vitiating factor falling into some particular category. The applicability of the doctrine generally arises where there has been fraud or some other inequitable conduct, as opposed to a situation such as the present, where a solicitor giving a defective costs agreement to his client gives rise to the asserted "unjust" conduct, a concept I find difficult to accept.
The defendant's evidence sets out that the defendant would never have undertaken these proceedings, or run them in the way that it did, if it had not mistakenly believed that it was entitled to charge each of the plaintiffs for all work done. There is expert evidence setting out that the settlements were good results which were obtainable as a result of all the work done. The defendant changed its position reliant upon the belief that it could charge for all the work performed conformably with the costs agreements and disclosures sent to each of the plaintiffs.
The plaintiffs submit that any claim of unjust enrichment and/or change of position could not arise because as a matter of law the only amount the defendant was entitled to charge was that which was regulated by statute. A common law principle could not seek to trump regulations forming part of a statutory scheme containing consumer protection elements.
The plaintiffs also argued that no change of position could be made out on the facts. This was not a case where a person had suddenly received money in a bank account believing it to be money due and payable and then spending it; the defendant, who could be expected to know its obligations to its clients, had inequitably overcharged them: Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 307 ALR 512 at [157].
These are complex issues and the manner in which they were approached would have benefited from greater consideration than they were afforded. Doing the best I can in the circumstances, I consider that concepts of unjust enrichment have no place in defeating a statutorily regulated relationship between solicitor and client where the solicitor has obligations to make costs disclosures to the client and fails to do so.

Stjepanovic v Petrovich Law Group Pty. Ltd. Trading As NSW Compensation Lawyers;; Pavlovic v Petrovich Law Group Pty. Ltd. Trading As NSW Compensation Lawyers

At a glance

Court

Decision date

Source

Judgment (22 paragraphs)

Legislation Cited (12)

Cases Cited (12)