Blackstone Brief

BStone Admin | 23 Sep 2021
Ahern v Aon Risk Services Australia Ltd [2021] NSWCA 166

ng a costs assessor’s determination of costs. The Court of Appeal held, inter alia, there was no error by the primary judge. Main takeaways: Taking a “global” approach to determining the quantum of costs reasonable inter partes is a legitimate approach by a costs assessor and by a review panel; Applying reductions to hourly rates from $550 ph to $460 ph based on such global views is a reasonable approach, and is one which does not require reasons to be provided, as (at [73]): An invariable and inevitable feature of (a costs assessor’s) task is to select the appropriate hourly rate, or rates. After a sufficient period of experience, dealing with a great many assessments, many costs assessors would, I apprehend, select an hourly rate somewhat intuitively. It is not a concept that is necessarily reducible to simple articulation of everything that a costs assessor has taken into account in arriving at the hourly rate selected. Application of principles relating to proportionality when considering costs under the old LPA regime (which, unlike LPUL, did not have “proportionality” as a test) are appropriate when considering costs sought relative to the “outcome” of proceedings per LPA s364(2)(f).

BStone Admin | 15 Jun 2021
Indemnity costs awarded due to Network Ten’s “unreasonable [behaviour] from the outset”

the outset” Hafertepen v Network Ten Pty Ltd [2020] FCA 1456 The Applicant, Dylan Hafertepen, brought an interlocutory proceeding against the Respondent, Network Ten, seeking to reinstate the original proceeding and seeking specific performance of the settlement agreement – namely, that the article rectifying a defamatory journalist piece on the show The Project be placed somewhere where viewers would actually see it. By the way of background, in 2018 the television program The Project broadcasted a segment entitled Justice for Jack. This piece was republished by a number of media organisations around the world and on Youtube. The following year, Mr Hafertepen launched a proceeding alleging he was defamed in the segment because it implied that he had caused the death of “Jack” in order to inherit his estate which had been signed to him in Jack’s will only three weeks before his death. The proceeding culminated in a dismissal by consent in accordance with a terms of settlement. Although the interlocutory application related to specific performance of two clauses within the terms, this article will focus on Katzmann J’s reasons for awarding indemnity costs. It was Her Honour’s opinion that Network Ten’s behaviour was unreasonable from the outset. Her Honour highlighted the broad discretion courts have as to costs and detailed when and where indemnity costs would be awarded. Importantly, Her Honour clarified that such an order will not be made in this matter in the absence of a “special or unusual feature” which would justify a departure from the ordinary course (standard costs, costs follow the event), and that such an order is intended to be compensatory, not punitive. Examples provided by Her Honour of such “special or unusual features” justifying an indemnity costs order include: cases where the court wishes to indicate its disapproval of a party’s conduct of the litigation, and when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs. Both these circumstances applied in this matter. In her decision, Her Honour highlighted the work of Mr Hafertepen’s solicitors and the affidavit of Ms Webber, a solicitor in the firm Atkinson Vinden Lawyers, representative for Mr Hafertepen. Ms Webber had renewed her request for specific performance several times before the interlocutory application was filed. On 29 June 2020, a detailed letter was sent to Network Ten foreshadowing the application for indemnity costs. Despite this, Network Ten maintained its, what could be seen to be, nonchalant position. On 27 August 2020 Macpherson Kelley, acting for Network Ten, made an open offer to settle the application.  Besides the point that no offers were made regarding publishing the clarifying article on another page that was not the present location (at the bottom of the Terms of Use page on the 10play website), they offered that a legal representative of Mr Hafertepen attend their office to inspect letters per Clause 5 of the terms of settlement (Agreement) and that there be no order as to costs.  Clause 5 of the Agreement is reproduced below: Within 28 days of the date of final execution of this Agreement, Ten shall: (a) cause the Letters to Media Organisations to be sent to the various media organisations identified in Annexure B; and (b) cause a letter to be sent to Google, as publisher of YouTube, demanding removal of the Broadcast on the ground of infringement of copyright. In Her Honour’s opinion, Network Ten’s responses were inconsistent with its obligations under s 37N of the Federal Court of Australia act 1976 (Cth) – the overarching purpose. Her Honour stated at paragraph 121: “It is bewildering that in 2020, during a global pandemic, Ten would insist that Mr Hafertepen’s lawyer attend the office of Ten’s lawyers to inspect the letters to the media organisations,” Her Honour had sent the parties to mediation in order to resolve the matter. However, Network Ten continued to insist it was in the right with its actions and gave little regard to the application. No resolution was found at mediation. The few actions described above, in a long list that Her Honour attends to in her judgment, illustrate how acting in bad faith can lead to consequences – legal costs wise. This should be seriously considered by all parties to a litigation, along with their solicitors, particularly as large profile cases of defamation rise and large publishers are taken to court for their click bait publishing. In conclusion, Her Honour found in favour of Mr Hafertepen and orders were largely made in accordance with those sought by Mr Hafertepen – including, the awarding of costs to the Mr Hafertepen on an indemnity basis. Closing remarks Indemnity costs orders are often awarded when a party beats an offer of compromise or a Calderbank offer. Such orders are also made in special circumstances. The Full Federal Court in InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 provided a summary (at paragraph 11) of the special circumstances likely to justify departure from the ordinary rule to an order of indemnity costs. These are as follows: The bringing of an application is “high-handed”: Australian Guarantee Corporation Ltd v De Jager [1984] VicRp 40; [1984] VR 483, 502; An application has “no chance of success”: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1998) 81 ALR 397, 401; An application is “hopeless”: J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) [1993] FCA 70; (1993) 46 IR 301, 303; An application is “unnecessary”: Ragata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993); An application is brought and prosecuted “not for the bona fide purpose of protecting and enforcing a legal right, but to achieve an ulterior or extraneous purpose”: Ragata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993); An application is commenced in wilful disregard of known facts or contrary to well established law: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, 401; There has been “some relevant delinquency on the part of the unsuccessful party”: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 89; Where the justice of the case warrants such an order: Andrews v Barnes (1887) 39 Ch D 133, 141; and Where there are some special or unusual features in a case to justify the court the exercising its discretion in this way: Preston v Preston [1982] Fam 17, 39. Hafertepen v Network Ten Pty Ltd is relevant to all solicitors and litigants as it identifies the circumstances where there are some “special or unusual features” justifying a departure from the ordinary course (last dot point).

BStone Admin | 02 Dec 2020
Costs Recovery for Self Represented Litigants

en the court makes an order that a party in litigation (Party A) is liable to pay the costs of another party (Party B), Party B can recover from Party A a significant portion of the reasonable professional costs and disbursements associated with having a solicitor act in their matter. Complications arise when Party B does not have a solicitor and is self-represented. Further complications arise when Party B is a solicitor, barrister, law firm or an incorporated legal practice.   The general rule that a self-represented litigant cannot be recompensed for his/her time spent in litigation is undisputed in Australia.   Prior to September 2019, self-represented solicitors and law practices relied on the UK case of London Scottish Benefit Society v Chorley to recover their professional costs from the losing party. This was known as the ‘Chorley exception’ to the general rule.    However, on 4 September 2019, the High Court delivered judgment in the matter of Bell Lawyers Pty Ltd v Pentelow (Pentelow) clarifying that the Chorley exception is not part of the common law of Australia. Accordingly, self-represented barristers and solicitors cannot recover their professional costs from the party liable to pay costs in a proceeding.   The High Court acknowledged that the inapplicability of the Chorley exception did not alter the ‘well-established understanding’ that government agencies and corporations are entitled to recover costs of their in-house solicitors when successfully acting in litigation on behalf of their employer.   SELF-REPRESENTED LAW FIRMS   Pentelow left the door open on the issue of whether self-represented law firms are entitled to recover professional costs incurred by their employed solicitors.   On 13 February 2020, the Court of Appeal of the Supreme Court of Victoria (VSCA) clarified this issue in its unanimous decision in United Petroleum Australia Pty Ltd v Freehills (United Petroleum).    In the Supreme Court of Victoria (VSC), the law firm Freehills was successful in two sets of proceedings against its former client United Petroleum – one proceeding commenced by Freehills to recover outstanding legal fees, and the second commenced by United Petroleum for negligence during the provision of legal services. Freehills obtained judgment in both proceedings for its fees and special costs orders in its favour.   United Petroleum applied to the VSCA for leave to appeal the decisions in both proceedings. Interestingly, the hearing of the application commenced on the same day that the High Court provided judgment in Pentelow.   Relying on reasoning in Pentelow, the VSCA confirmed that Freehills could not rely on the Chorley exception for the purpose of recovering costs of the work of its employed solicitors and other staff, as that exception had been retrospectively abolished by the High Court. Freehills conceded it could not recover costs in respect of work undertaken by partners of the firm. The only available avenue was determining that the role of employed solicitors of law firms was analogous to that of in-house counsel/solicitors in government agencies and corporations, whose costs are recoverable on an inter partes basis and to whom the general rule does not apply.    Whelan, McLeish and Niall JJA held that employed solicitors of law firms are not analogous to in-house counsel because the employer law firm is both the party and the solicitor on the record (that is, it is self-represented). In contrast, an employer corporation/government agency is the party and the in-house counsel is the solicitor on the record. Additionally, a partner of the law firm has ‘oversight and control of the litigation’ whereas the director of the corporation/government agency does not (save for providing instructions in the capacity of a client of the in-house lawyer).   As a result, Freehills was not entitled to recover the fees incurred for work undertaken by its employed solicitors and other staff.   SELF-REPRESENTED INCORPORATED LEGAL PRACTICES   While United Petroleum dealt with the rights of law firms (a partnership of legal practitioners, including incorporated law practices), on 5 June 2020 the VSC delivered judgment in Guneser v Aitken Partners (Guneser) clarifying the position on the rights of an incorporated legal practice (ILP) to recover its employees’ costs of acting on its behalf.   Aitken Partners Pty Ltd, an ILP, was successful on three matters: a taxation of costs initiated by its former client Mr Guneser; a review of that taxation by a costs judge; and an appeal from that costs judge’s decision to the trial division.    With respect to the costs aspects of each decision, while the costs registrar awarded Aitken Partners full professional costs and disbursements for acting for itself on the taxation, the costs judge, on review, set aside that decision and allowed Aitken Partners to recover only disbursements incurred during taxation. The costs judge made a further order for recovery of disbursements incurred for acting for itself in the review.   The question before the trial division on cross-appeal was whether the costs judge’s decision on costs was correct.   In Pentelow, their Honours’ comments were confined to a particular form of ILP – one where the employed solicitor is the sole director and shareholder. Yet no determination was made about the entitlement of an ILP to recover professional costs when acting for itself in litigation, whether by its principal or employed solicitors.    As in United Petroleum, Macaulay J clarified that Aitken Partners could not rely on the Chorley exception to recover its professional costs after the position espoused by the High Court in Pentelow. The only option open to Aitken Partners was to demonstrate that their professional fees were recoverable on the same basis as in-house lawyers under the ‘well-established understanding’.   Justice Macaulay noted that ‘an incorporated legal practice has the various incidents of being a corporation whereas [a] law partnership [firm] does not’. Despite this, Macaulay J rejected Aitken Partners’ argument that employees of an ILP should be seen as analogous to an in-house lawyer. Instead Macaulay J highlighted several reasons demonstrating ILPs being more analogous to law firms when considering whether the costs should be recoverable. These included no practical or functional separation between the party to the litigation and the solicitor on the record, and the ultimate supervision and control of the legal work of its employees being at the hands of directors of the ILP.    Accordingly, the decision of the costs judge was upheld.   CONCLUSION   In Australia, self-represented solicitors, barristers, law firms and incorporated legal practices, just like all other self-represented litigants, cannot recover costs for successfully acting for themselves. This ensures the fundamental notion of equality before the law is upheld.   All self-represented litigants are, however, entitled to recover their disbursements, including counsels’ fees.   The general rule does not apply to government agencies and corporations as these entities are rarely, if ever, ‘self-represented’. Instead they are represented by their in-house solicitors.   The High Court decision of Pentelow, extended by the Supreme Court of Victoria decisions of United Petroleum and Guneser, is likely to motivate solicitor and law practice litigants to outsource work to independent solicitors or barristers, whose costs can be recovered.   Dipal Prasad is a senior associate at Blackstone Legal Costing, specialising in legal costs disputes in Victoria, NSW and Queensland. She is also a Court Appointed Costs Assessor (Qld).  PHONE 03 9606 0027 EMAIL dipal.prasad@bstone.com.au WEBSITE http://www.bstone.com.au.  

BStone Admin | 22 Oct 2020
Party/party costs recovery for different types of self-represented litigants in Australia

Australia   Self-represented litigants generally Cannot be recompensed for her/his own time spent in litigation: Cachia v Hanes (1994) 179 CLR 403.   Self-represented barristers and/or solicitor litigants Cannot recover professional costs for their own time spent acting in a proceeding from the party liable to pay costs: Bell Lawyers Pty Ltd v Pentelow (2019) 93 ALJR 1007. [2019] HCA 29 (Pentelow).   Self-represented government agencies and corporations Entitled to recover costs of their in-house solicitors when successfully acting in litigation on behalf of their employer: Obiter in Pentelow.   Self-represented law firms Cannot recover principal or partner’s costs of acting in litigation on behalf of the law firm: Pentelow.   Similarly, cannot recover fees incurred for work undertaken by its employed solicitors and other staff. Role of employed solicitors of law firms are not analogous to that of in-house counsel/solicitors in government agencies and corporations because, amongst other things, the employer law firm is both the party and the solicitor on the record (i.e. it is self-represented), whereas the employer corporation/government agency is the party and the in-house counsel is the solicitor on the record: United Petroleum Australia Pty Ltd v Freehills [2020] VSCA 15 (United Petroleum).   Self-represented incorporated legal practices Cannot recover director’s costs of acting in litigation on behalf of the ILP: Pentelow. Cannot recover its employees’ professional costs of acting for the ILP: Guneser v Aitken Partners [2020] VSC 329 for the same reasons provided in United Petroleum as noted above.   Summary In Australia, self-represented solicitors, barristers, law firms, and incorporated legal practices, just like all other self-represented litigants, cannot recover costs for their own time spent in litigation. All self-represented litigants are, however, entitled to recover their disbursements, including counsel’s fees.

BStone Admin | 11 May 2020
Can your firm claim interest on legal fees?

ABLE ON A SOLICITOR/CLIENT BASIS Solicitors can only recover interest on unpaid legal costs if their bill contains a statement specifying that interest is payable and specifying the applicable rate of interest. If the costs agreement does not contain a clause providing for charging interest on unpaid legal costs, then interest is only chargeable if the costs are unpaid 30 days or more after the law practice has given a bill. Queensland In Queensland, the maximum rate of interest rate applicable to unpaid solicitor/client bills issued between 1 January 2020 and 30 June 2020 is 6.75%. The Supreme Court of Queensland Practice Direction in relation to interest currently allows law practices to charge interest at a rate six (6) percent above the Cash Rate last published by the Reserve Bank of Australia before a 1 January to 30 June period commenced or a 1 July to 31 December period commenced in any year, depending on when the bill was issued. See Legal Profession Act 2007 (Qld) s 321; Legal Profession Regulation 2017 (Qld) s 72; Civil Proceedings Act 2011 (Qld) s 59 (3); Supreme Court of Queensland, Practice Direction Number 7 of 2013, Interest Rates, cl 4, https://www.courts.qld.gov.au/courts-calculator/interest-rates#money. New South Wales & Victoria In NSW and Victoria, the maximum rate of interest rate applicable to unpaid solicitor/client invoices issued between 20 March 2020 and 7 May 2020 is 2.25%. The relevant regulation provides that the maximum rate of interest is the rate that is equal to the Cash Rate Target as at the date the bill was issued by the law practice, increased by two (2) percentage points. This is significantly lower than the amount of interest chargeable in Queensland. See Legal Profession Uniform Law (NSW) s 195 and Legal Profession Uniform General Rules 2015 r 75. INTEREST RECOVERABLE ON AN INTER PARTES BASIS New South Wales allows interest to be recovered on an inter partes basis from the date on which an order as to costs, entitling one party to recover costs from another party, is made. This means interest is recoverable from a period before party/party costs are quantified. The receiving party can recover interest from the paying party at a rate six (6) percent above the Cash Rate last published by the Reserve Bank of Australia before a 1 January to 30 June period commenced or a 1 July to 31 December period commenced in any year, depending on the date of a costs order. See Civil Procedure Act 2005 (NSW) s 101 and Uniform Civil Procedure Rules 2005 (NSW) r 36.7.

BStone Admin | 16 Jan 2020
Blackstone Brief Volume 19

looks forward to bringing you news on costs in 2020. Looking back at one of the most significant decisions in legal costs in 2019, Brett Linsdell, one of our stellar Melbourne lawyers, looks at the abolishment of the Chorley exception. What are the implications for Australian lawyers from this landmark decision? In Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 the High Court of Australia abolished a legal rule held for more than a century, when finding the Chorley exception is no longer part of the Australian common law. The General & Chorley Exception An award for costs is considered a partial indemnity for the legal costs incurred in litigation. Following from this, partial indemnity is the general rule that self-represent litigants are not able to recover costs for the work and time expended during litigation. The exception to this rule was, of course, what become known as ‘the Chorley exception’. This exception dates back to 1884 when the Court of Appeal of England and Wales in London Scottish Benefit Society v Chorley[1] held that successful self-represented solicitor litigants were entitled to recover professional costs incurred for legal work carried out by themselves during the proceeding. An Overview of Bell and Pentelow Flash forward to 2019 and Ms Pentelow, the respondent in the seminal High Court proceeding which has now revoked the Chorley exception, a barrister in her own right, had been briefed and retained to appear in a matter before the Supreme Court of New South Wales by Bell Lawyers. At the conclusion of this matter, Ms Pentelow’s fees were only partly paid and a dispute ensured between Ms Pentelow and Bell Lawyers as to Ms Pentelow’s outstanding fees. Ms Pentelow engaged a solicitor and filed her claim seeking to recover her unpaid fees in the Local Court of New South Wales. The Local Court found in favour of Bell Lawyers. Aggrieved by the ruling, Ms Pentelow appealed to the Supreme Court, whilst engaging the services of Senior Counsel to assist. As one might expect, Ms Pentelow utilised her legal prowess and skills throughout the two proceedings, undertaking various tasks, including, but not limited to, preparing draft documents and affidavit material, engrossing submissions and other general work. Ms Pentelow was successful in the appeal, obtaining a favourable costs order, with costs to be paid by Bell Lawyers. When preparing her claim for costs, in addition to the fees of her solicitor and Senior Counsel, Ms Pentelow sought the recovery of her own fees for the work she conducted throughout the proceeding. Her fees were claimed in the vicinity of $44,000. The Court appointed costs assessor, and a subsequent review panel, rejected the claim for Ms Pentelow’s fees. Underpinning the determination, was the understanding that the Chorley exception did not extend and apply to barristers. Ms Pentelow, determined to review the panel’s decision, was unsuccessful in an appeal from the Review Panel to the District Court[2]. However, she then succeeded on Appeal[3], with the New South Wales Court of Appeal finding in her favour with a 2:1 majority, extending the Chorley exception to work carried out by a barrister. In December 2018, Bell Lawyers were granted special leave to appeal the decision to the High Court of Australia. The High Court was requested to consider whether the Chorley exception extends to Barristers and, fundamentally, whether the exception should be recognised as a part of Australian common law at all.[4] High Court Decision On 4 September 2019 the High Court found in favour of Bell Lawyers, allowing the appeal with a 6:1 majority. Kiefel CJ, Bell Keane and Gordon JJ The lead judgment was critical of the Chorley exception and the ramifications it could have in practice. In its application, it was held, this common law exception created a right retained only by solicitors. In other words, creating privilege and inequality before the law.[5] Their Honours provided: (T)he Chorley exception is not only anomalous, it is an affront to the fundamental value of equality of all persons before the law. It cannot be justified by the considerations of policy said to support it.[6] Further, their Honours highlighted the undesirable situation in which a solicitor would act for themselves. Underlining this concern is the maintenance of objectivity as a result of self-interest. The lack of an impartial mind may inadvertently increase legal costs.[7] When considering an award for costs to be a partial indemnity for professional costs incurred during litigation. Their Honours questioned whether an award of costs to a self-represented practitioner could be considered more akin to compensation for a loss of earnings or as a reward for success, rather than partially indemnifying the successful party for monies outlaid during the litigation. Gageler J His Honour considered the history of the common law and the application of the exception in Australia. Resonating comments made in Cachia v Hanes[8], where the exception was acknowledged as “somewhat anomalous”, with “unconvincing” support to vary from the general principle. His Honour queried whether “the logical answer may be to abandon the exception in favour of the general principle”. Gageler J further considered the application of the exception as being inconsistent with the Civil Procedure Act 2005 (NSW). Section 3 (1) of the Act defines costs in relation to proceedings to mean “costs payable in or in relation to the proceedings and includes fees, disbursements, expenses and remuneration.” His Honour considered this definition to reflect the general principle in a manner which leaves no room for an exception.[9] His Honour nicely summarised his position at [63] where he said: This Court in its capacity as ultimate custodian of the contemporary common law of Australia is now to take the step foreshadowed in Cachia of determining that the exception to the general principle should be abandoned. For the reasons given by Kiefel CJ, Bell, Keane and Gordon JJ, that is the step which should now be taken. Edelman J His Honour Justice Edelman considered and took issue with the distinction arising from the exception. Aligning with the lead judgment, his Honour held, at [91]: If a distinction were said to lie in the skill often possessed by unrepresented solicitors but not by other unrepresented litigants then costs should be permitted for the time of an unrepresented builder, plumber, engineer, architect, or accountant who relies on their expertise to perform work on their own case including preparing submissions on matters within their expertise. In summary, Edelman J underpinned the position when considering the common law rule, which has yet to be applied with any statutory enactment. When considering the exception is inconsistent with the underlaying principle upon which costs rules have developed, it is perhaps inevitable the adopted Chorley exception has finally been overruled in Australia.[10] Nettle J – Dissent His Honour Justice Nettle agreed with the ultimate result. However, his Honour did not favour the terms relied upon by the majority. Nettle J supposed that the Chorley exception did not extend to barristers and ought not be applied in this particular case. However, his Honour was not in agreement with the abolition of the exception from Australian common law. Generally concerned with wider ramifications which may arise from abrogating the exception.[11], his Honour said that the abrogation of the exception could have been considered by Parliament where the nature and the extent of the potential regulatory and fiscal consequences could be measured and balanced.[12] The Effect The High Court, although considering the point (at [51]), is yet to conclude the position of a solicitor employed by an incorporated legal practice for which they are the sole director and shareholder and who is a party to a proceeding. This question considers the extent of detachment a law firm could provide a self-represented litigant from the proceeding generally, requires consideration of the award of costs as a partial indemnity. Regardless of this, the Chorley exception is no longer recognised as a part of the common law of Australia. Hence, a self-represented solicitor or barrister is no longer be able to recover his or her own professional costs incurred for acting on his or her own behalf in any litigation. The High Court has clearly stated that the time and effort expended by all self-represented litigants is to be treated equally. A solicitor or barrister seeking to work on their own case in order to save costs is no longer a sensible option when costs considerations are paramount. The Court has reiterated concerns with respect to self-represented litigants generally, who may lack impartial decision making and independent advice, complicated by self-interest and investment. [1] (1884) 13 QBD 872 at 876, 977, 878. [2] Pentelow v Bell Lawyers [2016] NSWDC 186. [3] Pentelow v Bell Lawyers [2018] NSWCA 150. [4] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 2. [5] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 38. [6] Ibid 3. [7] Ibid 18. [8] (1994) 179 CLR 403, 411 – 412. [9] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 68. [10] Ibid 93. [11] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 72. [12] Ibid 73.

BStone Admin | 17 Dec 2019
Blackstone Brief Volume 18

Brett Linsdell is a Costs Lawyer working out of the Melbourne office of Blackstone Legal Costing, one of the largest legal costing firms in Australia, with experienced costs lawyers and consultants in Sydney, Melbourne, Brisbane and the Gold Coast. Brett regularly works in the Victorian, New South Wales and federal jurisdictions, including the High Court of Australia. In Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 the High Court of Australia abolished a legal rule held for more than a century, when finding the Chorley exception is no longer part of the Australian common law. The General & Chorley Exception An award for costs is considered a partial indemnity for the legal costs incurred in litigation. Following from this, partial indemnity is the general rule that self-represent litigants are not able to recover costs for the work and time expended during litigation. The exception to this rule was, of course, what become known as ‘the Chorley exception’. This exception dates back to 1884 when the Court of Appeal of England and Wales in London Scottish Benefit Society v Chorley[1] held that successful self-represented solicitor litigants were entitled to recover professional costs incurred for legal work carried out by themselves during the proceeding. An Overview of Bell and Pentelow Flash forward to 2019 and Ms Pentelow, the respondent in the seminal High Court proceeding which has now revoked the Chorley exception, a barrister in her own right, had been briefed and retained to appear in a matter before the Supreme Court of New South Wales by Bell Lawyers. At the conclusion of this matter, Ms Pentelow’s fees were only partly paid and a dispute ensured between Ms Pentelow and Bell Lawyers as to Ms Pentelow’s outstanding fees. Ms Pentelow engaged a solicitor and filed her claim seeking to recover her unpaid fees in the Local Court of New South Wales. The Local Court found in favour of Bell Lawyers. Aggrieved by the ruling, Ms Pentelow appealed to the Supreme Court, whilst engaging the services of Senior Counsel to assist. As one might expect, Ms Pentelow utilised her legal prowess and skills throughout the two proceedings, undertaking various tasks, including, but not limited to, preparing draft documents and affidavit material, engrossing submissions and other general work. Ms Pentelow was successful in the appeal, obtaining a favourable costs order, with costs to be paid by Bell Lawyers. When preparing her claim for costs, in addition to the fees of her solicitor and Senior Counsel, Ms Pentelow sought the recovery of her own fees for the work she conducted throughout the proceeding. Her fees were claimed in the vicinity of $44,000. The Court appointed costs assessor, and a subsequent review panel, rejected the claim for Ms Pentelow’s fees. Underpinning the determination, was the understanding that the Chorley exception did not extend and apply to barristers. Ms Pentelow, determined to review the panel’s decision, was unsuccessful in an appeal from the Review Panel to the District Court[2]. However, she then succeeded on Appeal[3], with the New South Wales Court of Appeal finding in her favour with a 2:1 majority, extending the Chorley exception to work carried out by a barrister. In December 2018, Bell Lawyers were granted special leave to appeal the decision to the High Court of Australia. The High Court was requested to consider whether the Chorley exception extends to Barristers and, fundamentally, whether the exception should be recognised as a part of Australian common law at all.[4] High Court Decision On 4 September 2019 the High Court found in favour of Bell Lawyers, allowing the appeal with a 6:1 majority. Kiefel CJ, Bell Keane and Gordon JJ The lead judgment was critical of the Chorley exception and the ramifications it could have in practice. In its application, it was held, this common law exception created a right retained only by solicitors. In other words, creating privilege and inequality before the law.[5] Their Honours provided: (T)he Chorley exception is not only anomalous, it is an affront to the fundamental value of equality of all persons before the law. It cannot be justified by the considerations of policy said to support it.[6] Further, their Honours highlighted the undesirable situation in which a solicitor would act for themselves. Underlining this concern is the maintenance of objectivity as a result of self-interest. The lack of an impartial mind may inadvertently increase legal costs.[7] When considering an award for costs to be a partial indemnity for professional costs incurred during litigation. Their Honours questioned whether an award of costs to a self-represented practitioner could be considered more akin to compensation for a loss of earnings or as a reward for success, rather than partially indemnifying the successful party for monies outlaid during the litigation. Gageler J His Honour considered the history of the common law and the application of the exception in Australia. Resonating comments made in Cachia v Hanes[8], where the exception was acknowledged as “somewhat anomalous”, with “unconvincing” support to vary from the general principle. His Honour queried whether “the logical answer may be to abandon the exception in favour of the general principle”. Gageler J further considered the application of the exception as being inconsistent with the Civil Procedure Act 2005 (NSW). Section 3 (1) of the Act defines costs in relation to proceedings to mean “costs payable in or in relation to the proceedings and includes fees, disbursements, expenses and remuneration.” His Honour considered this definition to reflect the general principle in a manner which leaves no room for an exception.[9] His Honour nicely summarised his position at [63] where he said: This Court in its capacity as ultimate custodian of the contemporary common law of Australia is now to take the step foreshadowed in Cachia of determining that the exception to the general principle should be abandoned. For the reasons given by Kiefel CJ, Bell, Keane and Gordon JJ, that is the step which should now be taken. Edelman J His Honour Justice Edelman considered and took issue with the distinction arising from the exception. Aligning with the lead judgment, his Honour held, at [91]: If a distinction were said to lie in the skill often possessed by unrepresented solicitors but not by other unrepresented litigants then costs should be permitted for the time of an unrepresented builder, plumber, engineer, architect, or accountant who relies on their expertise to perform work on their own case including preparing submissions on matters within their expertise. In summary, Edelman J underpinned the position when considering the common law rule, which has yet to be applied with any statutory enactment. When considering the exception is inconsistent with the underlaying principle upon which costs rules have developed, it is perhaps inevitable the adopted Chorley exception has finally been overruled in Australia.[10] Nettle J – Dissent His Honour Justice Nettle agreed with the ultimate result. However, his Honour did not favour the terms relied upon by the majority. Nettle J supposed that the Chorley exception did not extend to barristers and ought not be applied in this particular case. However, his Honour was not in agreement with the abolition of the exception from Australian common law. Generally concerned with wider ramifications which may arise from abrogating the exception.[11], his Honour said that the abrogation of the exception could have been considered by Parliament where the nature and the extent of the potential regulatory and fiscal consequences could be measured and balanced.[12] The Effect The High Court, although considering the point (at [51]), is yet to conclude the position of a solicitor employed by an incorporated legal practice for which they are the sole director and shareholder and who is a party to a proceeding. This question considers the extent of detachment a law firm could provide a self-represented litigant from the proceeding generally, requires consideration of the award of costs as a partial indemnity. Regardless of this, the Chorley exception is no longer recognised as a part of the common law of Australia. Hence, a self-represented solicitor or barrister is no longer be able to recover his or her own professional costs incurred for acting on his or her own behalf in any litigation. The High Court has clearly stated that the time and effort expended by all self-represented litigants is to be treated equally. A solicitor or barrister seeking to work on their own case in order to save costs is no longer a sensible option when costs considerations are paramount. The Court has reiterated concerns with respect to self-represented litigants generally, who may lack impartial decision making and independent advice, complicated by self-interest and investment. [1] (1884) 13 QBD 872 at 876, 977, 878. [2] Pentelow v Bell Lawyers [2016] NSWDC 186. [3] Pentelow v Bell Lawyers [2018] NSWCA 150. [4] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 2. [5] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 38. [6] Ibid 3. [7] Ibid 18. [8] (1994) 179 CLR 403, 411 – 412. [9] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 68. [10] Ibid 93. [11] Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29, 72. [12] Ibid 73.

BStone Admin | 17 Nov 2019
Blackstone Brief Volume 17

Mike Dudman is a Director of Blackstone Legal Costing, one of the largest legal costing firms in Australia with experienced costs lawyers and consultants in Sydney, Melbourne and Brisbane. Responsible for Blackstone’s Sydney, Brisbane and Gold Coast offices, Mike regularly gives evidence in Federal and Supreme Court matters. Costs of complying with a Subpoena to Produce – What’s recoverable? This question was answered recently in proceedings in which one of our own specialists accredited in costs law, Mike Dudman, provided exert evidence. In this month’s edition Mike sheds light on what can and can’t be claimed. There is a common misconception that, when compelled to produce documents to the Court in complying with a Subpoena to Produce issued to a non-party to proceedings, that party is entitled to recover all costs incurred in considering the subpoena and its scope, reviewing all relevant documents, sorting out those requiring production and then producing these to the Court. This is a misconception that compliance costs are recoverable on something akin to an indemnity costs basis. In my experience, it is true that a Court’s approach to compliance costs tend to be more generous than its approach to the parties to a dispute. Nevertheless, as the relatively recent case of Money Max Int Pty Limited (Trustee) v QBE Insurance Group Limited (No 3) [2018] FCA 2101 illustrates, costs incurred by a non-party to proceedings must always be reasonable. Principles established In Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 have been consistently followed in all jurisdictions.[1] In Fuelxpress, Lockhart J said (at [286]): The intent of r 4 A [the relevantly equivalent rule to r 667(1) of the Court Procedures Rules] is to compensate a person subpoenaed to produce documents for expense or loss reasonably incurred in complying with the subpoena. It is not the case of a successful party to litigation seeking recovery of costs where the distinction of solicitor and client costs on the one hand and party and party costs on the other is observed by taxing officers. It is a case of a third party seeking compensation for what it has actually cost it in expense or loss in complying with the subpoena. In those circumstances I think it is appropriate in this case that the legal costs and expenses incurred by DMR in and about compliance with the subpoena (including its costs of this motion) and in and about the preparation of the bill for taxation and attending to the taxation should be on a solicitor and client basis. Following Fuelxpress, his Honour Justice Refshauge conveniently summarised costs recoverable by a non-party incurred in complying with a Subpoena to Produce in the A.C.T. Supreme Court proceedings Taylor v Dixon Advisory Limited & Ors [2010] ACTSC 161 (22 December 2010) where he said, at [47]: Thus, the principles to be applied seem to be that the costs of compliance with a Notice for Non-Party Production, payable on an indemnity basis so long as they have been reasonably incurred, include: • if the matter is complex and more so than the ordinary case, the costs of advice about its validity and the extent of compliance required; • correspondence or attendances with the issuing party about its terms and whether they can be narrowed or production of the documents completed in a particular way; • advice about whether documents are confidential or subject to legal professional privilege; • correspondence and attendance to negotiate the terms of access to the documents sought, including the formulation of undertakings as to confidentiality; • attendances when the documents are produced, though this will be ordinarily by post; • any necessary attendances at court to ensure those arrangements are effected; • attendances to ensure undertakings have properly been given and compliance is secured; and • preparing, negotiating and having taxed a bill of costs for such costs and attending on such taxation. Costs of work which is not to be characterised as compliance with the Notice, such as challenges to its validity, the filing of an affidavit under r 664, and correspondence on attendances in relation to other matters, with an enforcement of a costs order following taxation, should be paid on an ordinary party/party basis, unless the court considers in the particular circumstances that some other order is warranted. Hence, it is now settled law that a person who seeks to resist or comply with a subpoena is entitled to have their costs and expenses reimbursed so that they are not out of pocket as a result: ASADA v 34 Players and One Support Person (No 2) [2015] VSC 14; Prakash v Nationwide News Pty Ltd (Ruling No 6) [2017] VSC 331. This was specifically stated in Money Max Int Pty Limited (Trustee) v QBE Insurance Group Limited (No 3) [2018] FCA 2101 (20 December 2018) (at [7]). Costs sought must nevertheless be reasonable, and some features of a claim for costs (such as bulk time entries) will reduce reliability of the claim and, consequently, the costs allowed for the work undertaken. Other factors will reduce costs claimed, including where work has been unnecessarily outsourced by the non-party to their lawyers at higher hourly rates, in which case related costs may be reduced to the non-party’s rate, or if work not specifically related to compliance is claimed, in which case it may be recoverable on the ordinary “party and party” basis. In the Money Max proceedings PricewaterhouseCoopers (PwC) had been issued a subpoena to produce documents to the Federal Court. In responding to the subpoena, issued at the Applicant’s request, PwC sought orders that subpoena costs be assessed in the amount of $132,333 through a lump sum costs assessment procedure, and that it be allowed $26,842 for costs incurred in the preparation of its lump sum costs application.  The applicant asserted that a reasonable lump sum costs assessment would be approximately $39,774. In allowing $90,000 for the compliance costs and $17,000 for the costs of the gross sum application, salient points of judgment delivered by the Honourable Justice Murphy include: The use of a lump sum costs procedure is not limited to lengthy and complex cases where the process of taxation is likely to be unduly protracted or expensive, but may be appropriate where the “simplicity of the dispute makes a lump sum appropriate”. When awarding costs on a lump sum pursuant to Rule 40.22, evidence relating to costs must be sufficiently detailed and must identify the components of the costs incurred and how they have been calculated (Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus [2007] FCA 1878 at [26] (Flick J)) and the Court must be sufficiently confident that the approach taken to estimate costs is logical, fair and reasonable: Beach; Seven Network Ltd v News Ltd [2007] FCA 2059 at [29] (Sackville J); WM Wrigley JR Company v Cadbury Schweppes Pty Ltd [2006] FCA 1186 at [9] (Sundberg J). Although Rule 24.22 of the Federal Court Rules 2011 (Cth) entitles a person complying with a subpoena to have their costs and expenses reimbursed so that they are not “out of pocket” as a result, if the task of reviewing documents for relevance is likely to have been less expensively and more efficiently performed by the non-party itself, rather than by its lawyers, and if legal advice was not required outside the “ordinary case”, costs of doing so will be reduced to rates more akin to paralegal work in accordance with the overarching purpose of civil practice and procedure provisions set out in s 37M of the Federal Court of Australia Act 1976. Ultimately, his Honour in Money Max reduced PWC’s costs on a broad brush basis, noting bulk time entries reduced their reliability, holding that corresponding about the costs of compliance is not a cost incurred in compliance and finding that costs of $132,333 were not proportionate to the tasks of reviewing 9,000 emails and producing 1,267 documents. Whilst the $7,000 in fees charged by Blackstone Legal Costing relating to evidence relied upon in the gross sum application were considered reasonable (and were allowed in full), other costs of the application were reduced from $19,842 to $10,000 as the former amount was not considered to be reasonable and proportionate for the preparation of short (three-page) submissions and a short affidavit. [1] See, for example, Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 (at [33]); Deposit & Investment Co Ltd (Receivers Appointed) & Ors v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267; Boensch v Pascoe (No 2) [2008] FCA 1127; Kelleher v Anderson [2008] Fam CA 113 (at [35]).

BStone Admin | 17 Oct 2019
Blackstone Brief Volume 16

has insufficient funds to pay for any costs order? Client won a court case and the unsuccessful party made submissions there should be no order as to costs because of impecuniosity? How often do we, as solicitors, find ourselves with a client in one of these positions? What are our options? In ‘extremely rare’ circumstances (Austen v Ansett Transport Industries (Operations) Pty Ltd [1993] FCA 403 [58]) and ‘exceptional’ circumstances (Ritter v Godfrey [1920] 2 KB 47, 52) judges can, despite the ‘costs follow the event’ rule, deprive the successful party of its costs of the proceedings. The High Court of Australia recently considered whether the impecuniosity of the unsuccessful party justifies the successful party bearing their own costs. Northern Territory v Sangare [2019] HCA 25 Mr Sangare brought a defamation claim against the Northern Territory of Australia seeking damages in the sum of $5 million. The Supreme Court of the Northern Territory dismissed Mr Sangare’s claim and he filed a Notice of Appeal. Although the appeal was unsuccessful, the Court of Appeal refused to order that Mr Sangare pay the Northern Territory’s costs because Mr Sangare’s impecuniosity would likely render the order futile. The Northern Territory of Australia appealed the Court of Appeal’s decision in relation to costs. The High Court of Australia allowed the appeal on the following grounds: The Court of Appeal erred in principle in treating Mr Sangare’s impecuniosity, without more, as sufficient reason to deny the Northern Territory an order for its costs of the litigation, in which it had been wholly successful (House v The King (1936) 55 CLR 499, 505). It was not open to the Court of Appeal to refuse to award the Northern Territory its costs on the ground that such an order would be futile. Numerous authorities support the principle that the court’s power to make an order as to costs is a discretionary power. It is also well established that this discretion must be exercised judicially. In engaging in an exercise of this discretion, reference must be given to considerations connected to its exercise and the facts of the litigation (Latoudis v Casey (1990) 170 CLR 534). In light of this discretion, there seems no better reason to refrain from making an order for costs against an unsuccessful party than that such an award would be futile. With the Sangare decision, the highest court of Australia has affirmed the position stated by various lower courts that impecuniosity on its own will not limit the judicial discretion to deprive the successful party of the costs of the proceedings. Decisions of the Supreme Court of Victoria in the past few months highlight the need for barristers to be aware of the small steps that can be taken to ensure a litigating client, as opposed to their instructing solicitor, becomes liable for their fees. These decisions not only highlight potential problems in costs recovery, but also illustrate the risks that counsel can be exposed to in being sued by the ‘ultimate’ client in relation to costs. They also make clear that barristers are able to sue clients for costs recovery despite the fact that they were engaged by another party (their instructing solicitor). So, what’s the point of making a costs order against an impecunious party? The High Court’s decision to order an unsuccessful party to pay costs, despite that party’s impecuniosity, is reasonable for the following reasons: A costs order provides a deterrent to litigants without funds who may otherwise conduct proceedings in a way that forces other parties to the proceedings to unnecessarily incur costs Rose v Barwon (No 2) [2010] FamCA 738 [8]). A costs order provides the successful party with a reasonable expectation of recovering its proper costs. Courts have held that the losing party’s financial position is irrelevant (Board of Examiners v XY [2006] VSCA 190), even though the successful party’s ability to recover those costs may prove illusory because there are insufficient funds to cover those costs. Courts are expected to exercise their jurisdiction in an exemplary manner <ahref=”https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2010/681.html” target=”_blank”>(Australian Competition and Consumer Commission v Seal-A-Fridge Pty Ltd (No 2) [2010] FCA 681 [47]). A litigant’s financial ability to satisfy a costs order is not usually a matter connected with the conduct of the proceedings (Director-General Department of Land and Water Conservation v Ramke[1999] NSWLEC 22 [44]; WAEY v Minister for Immigration and Multicultural and Indigenous Affairs[2003] FCA 1314 [41]). If courts could refrain from ordering costs against unsuccessful parties, courts would be burdened with the task of determining the level of impecuniosity or wealth of the unsuccessful party in order to justify its exercise of the costs discretion (Board of Examiners v XY [33]). A costs order can be used as a bar against the unsuccessful party commencing further litigation. There are important policy considerations that back the accepted principle that costs follow the event. It is critical that parties who are contemplating litigation, either by commencing or defending proceedings, consider the costs involved. If the principle that costs follow the event was to be disregarded, and reliance was placed on impecuniosity alone to avoid a costs order, an increase in litigation would be inevitable (Oshlack v Richmond River Council (1998) 193 CLR 72 [68]). Options for an impecunious unsuccessful party There are avenues whereby impecuniosity can be at least partially accommodated by courts. When there are multiple parties, there is ordinarily greater scope to take into account an unsuccessful party’s impecuniosity. By way of example, impecuniosity may justify the making of a Bullock Order (where the plaintiff pays the successful defendant’s costs and seeks reimbursement from the unsuccessful defendant) instead of a Sanderson Order (where the unsuccessful defendant has to pay the successful defendant’s costs). The court may also allow additional time to an impecunious party to pay costs (eg, Tzavellas v Canterbury City Council (1999) 105 LGERA 262, 265; CRW v CML (No 2) [2003] FMCAfam 446 [37]), or allow the party to make payment by instalments (Underdown v Secretary, Dept of Education, Employment and Workplace Relations (No 2) [2009] FCA 1223 [9]). It is important to note that, while impecuniosity alone cannot fetter the judicial discretion as to costs, a party’s inability to pay any costs awarded against them may permit a court to exercise its discretion to make no order as to costs when coupled with other compelling factors, such as the public interest. In Oshlack v Richmond River Council the High Court upheld the Land and Environment Court’s decision to make no order as to costs against the unsuccessful party in circumstances where there was a public interest in the litigation’s outcome. The High Court posited that, where a successful party had an interest in resolving an uncertainty by proceeding with litigation, and the initiation of such litigation was promoted by wide provisions as to standing, it was not unfair that the successful party bear its own costs. Accordingly, if an impecunious unsuccessful party can establish that the litigation was motivated by the public’s interest in the outcome of the proceeding, they may have success in persuading the court to make no order as to costs. At Blackstone Legal Costing we guide you through the labyrinth that is cost law to achieve optimum recovery for both you and your clients. Dipal Prasad & Romaine Abraham Dipal Prasad & Romaine Abraham are senior associates at Blackstone Legal Costing, one of the largest legal costing firms in Australia with experienced costs lawyers and consultants in Sydney, Melbourne and Brisbane. Dipal is committed to maximising costs recovery for successful parties in litigation and minimising costs liability for unsuccessful parties. With experience across New South Wales and Victoria, Romaine is skilled in obtaining the best commercial results for her clients.

BStone Admin | 17 Oct 2019
Blackstone Brief Volume 15

bourne senior associates, Dipal Prasad, considers recent authorities examining who really retains the liability for paying Counsel’s fees – the lawyer or the client. When a barrister is engaged by a solicitor, the usual position is that the solicitor is liable for the counsel’s fee, and then the client becomes liable to indemnify the solicitor for those fees (assuming the barrister was briefed on the client’s instructions).This position is stated in the case of Dimos v Hanos & Elgaln [2001] VSC 173: ‘In the absence of any contrary evidence, the retention of the barrister would result in a contract between the barrister and the solicitor.’[1] Decisions of the Supreme Court of Victoria in the past few months highlight the need for barristers to be aware of the small steps that can be taken to ensure a litigating client, as opposed to their instructing solicitor, becomes liable for their fees. These decisions not only highlight potential problems in costs recovery, but also illustrate the risks that counsel can be exposed to in being sued by the ‘ultimate’ client in relation to costs. They also make clear that barristers are able to sue clients for costs recovery despite the fact that they were engaged by another party (their instructing solicitor). Counsel’s responsibility Liability for fees pursuant to a counsel’s retainer can arise only if counsel complies with their disclosure obligations. In New South Wales and Victoria these obligations are straightforward. In a situation where a solicitor retains a barrister to act on behalf of a client, it is the solicitor who ‘must disclose to the clients the details specified in section 174(1)’: s175 of the Legal Profession Uniform Law (LPUL).[2] While counsel is not required to make costs disclosures directly to the client, the LPUL prescribes that counsel must disclose to the instructing solicitor information necessary for the solicitor to comply with subsection 1. Details that must be disclosed by the barrister to the instructing solicitor before, or as soon as practicable after, being engaged to undertake legal work are: the basis on which legal costs will be calculated in the matter (eg, hourly rates and daily rates, and when they apply); and an estimate of total legal costs to be charged by the barrister. If there are any significant changes to the basis of charging or the estimate of total legal costs, counsel must provide, as soon as practicable, information disclosing the change. While there is no appropriate form for disclosure, all costs disclosures must be made in writing. A letter providing the required information will suffice. Disclosure of costs is the first and most basic step to ensure fee recoverability. Without appropriate disclosure counsel is usually limited to fee recovery on a quantum meruit basis, relying on the costs assessor’s or taxing registrar’s assessment of fair and reasonable costs. Recent cases Holloway v Madgwicks [2018] VSC 773 On 13 December 2018, the Supreme Court of Victoria delivered an important decision pertaining to a solicitor/client dispute heard in the Costs Court, which went to a preliminary hearing before Associate Justice Wood. One of the issues in dispute at the preliminary hearing regarded whether the applicant client briefed counsel directly and, if so, what impact this would have on the applicant’s summons. The respondent law firm sought a declaration that counsel’s fees did not form part of the retainer with the solicitor, and therefore were not to be included in any solicitor/client bill of costs. Two of the counsel involved were briefed prior to 1 July 2015 and one counsel was briefed in 2016. Fees in dispute amounted to more than $500,000, with counsel’s fees totalling approximately $350,000. The usual position as stated in Dimos was considered by the Court. However, the respondent law firm tendered documents containing the following noteworthy paragraphs: First costs agreement: ‘you will be responsible for all fees and charges made and expenses incurred by any barristers’ Second costs agreement: ‘we will charge you at cost for any disbursements we incur on your behalf’ ‘you will be responsible for all the fees and charges made and expenses incurred by any barrister’ Counsel’s backsheets: ‘In this matter we engage you only as agents for the above client. Please ensure that you issue your fee slips in the name of the client on your tax invoice. While we will take all reasonable steps to ensure your fees are paid we accept no personal liability for payment of Counsel fees’ The fee slips of counsel were addressed to the law firm, and they were paid by the law firm from funds provided by the client (excluding one invoice paid directly by the client). The law firm issued invoices to the client and noted counsel’s fees as ‘expenses’ rather than disbursements. The Court found that, when considering all of these documents collectively, they amount to ‘contrary evidence’ as described in Dimos , which alleviated the liability for payment of counsel’s fees by the law practice. There being no obligation on the law firm to pay counsel’s fees, these fees were not to be included in the bill of costs which was the subject of the review. Petselis v Tatarka [2019] VSC 8 On 23 January 2019, just over a month after the decision was handed down in Holloway, the Supreme Court of Victoria issued a judgment in the case of Petselis v Tatarka [2019] VSC 8. Petselis dealt with the issue of whether a barrister can sue a client directly for non-payment of legal costs. In this matter Mr George Petselis, the appellant client, engaged Evans Ellis, a firm of solicitors. Evans Ellis engaged Mr Tatarka, the respondent barrister, to appear for the client on three separate occasions. The barrister’s fee for the third appearance was not paid. As a result, counsel issued proceedings against the client in the Magistrates’ Court of Victoria seeking debt recovery of his fees. A magistrate found for the barrister and ordered that the client pay him the amount of the claim plus interest and costs. Mr Petselis, the client, appealed the order on following grounds: it was not open to find that there was a contractual relationship between the client and the barrister; it was not open to find for the barrister in the absence of a contractual relationship between the parties; and if the magistrate found a contractual relationship, he erred by failing to find that the contract was void because the barrister did not comply with provisions of the LPUL. The appellant client submitted that, because the barrister was retained and briefed by his solicitors and not directly by him, there was no contract between him and the barrister. The following documents and facts were put to the Court: There were discussions a day before the hearing scheduled on 14 February 2017 to arrange for the barrister to appear for the client the following day. The client was a party to those discussions and was aware of the fees the barrister would charge. Email dated 13 February 2017 from the solicitor to the barrister: ‘We confirm our client has engaged you directly relation your [sic] briefing to appear tomorrow, with payment due within 30 days.’ Email dated 13 February 2017 from the barrister to the solicitor: ‘I confirm that you will brief me at a fee of $3500 (if finished by 1) or $5000 if the case extends beyond 1 payable in 30 days. I will not look to Evans Ellis if George fails to pay you for my legal fees and you will do what you can to ensure that he honours his obligations.’ Email dated 14 February 2017 from the barrister to the solicitor and the client: ‘I confirm that George has agreed to a fee of $5,000 and that I have asked my clerk to send you a fee slip in that amount. George has indicated his intention to pay the account directly to my clerk and when that happens I will advise you.’ The fee slip issued by the barrister’s clerk was issued to the solicitor. Upon non-payment of the invoice within 30 days, the barrister followed up the client for payment of the outstanding sum. Judge Keogh rejected the appellant client’s submission that there was no contract between the appellant and respondent, as His Honour found it to be ‘inconsistent with the observation of Gillard J in Dimos that “persons can contract to do anything”.’[3] Consistent with the provisions in <ahref=”http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/vic/VSC/2001/173.html” taregt=”_blank”>Dimos, Judge Keogh found that the appellant client entered into a tripartite agreement with his solicitor and the respondent barrister – ‘an agreement in which the solicitor retains and briefs the barrister, but the contractual obligation to pay the barrister’s fee is borne solely by the client’.[4] It was also noted that s180(1)(b) of the LPUL permits a costs agreement to be made between a client and a barrister or ‘a law practice retained on behalf of the client by another law practice’. As to the issue pertaining to the respondent barrister’s non-compliance with the LPUL, the Court made the following observations: 58… Mr Petselis did not argue at first instance that Mr Tatarka failed to comply with disclosure requirements in cls 174(2), (3) and (6), or that these matters were not disclosed to him Mr Petselis did not argue that the costs agreement was void because of a contravention of disclosure requirements or because of non-compliance with cls 180(2) and (3) of the LPUL. I agree with Mr Tatarka ’s submission that, had these arguments been made, he would have had the opportunity to call evidence to meet the case put against him. It would offend well-established principles if Mr Petselis were permitted to run a case on appeal which he did not seek to run at first instance.[15] 59 Mr Petselis entered a tripartite agreement with Evans Ellis and Mr Tatarka. When he did so he was aware of Mr Tatarka’s fees. There is little doubt he understood and gave consent to the proposed course of action for the conduct of the property dispute proceedings. In the circumstances of this case there is no reason why it should be Mr Tatarka, rather than Evan Ellis, who had to disclose the additional information under cl 174(2).’ Accordingly, the appeal was dismissed. Concluding remarks Recent cases provide valuable reminders that counsel must be vigilant about the terms of their retainers (including costs agreements and backsheets). Failure to comply with disclosure obligations risks confusion about the party ultimately liable for counsel’s fees. If it turns out that the ultimate client (as opposed to the instructing solicitor) is liable for the counsel’s fee, counsel must ensure that it has complied with its minimal disclosure requirements and the following points before commencing debt recovery proceedings against the client for outstanding fees: there is a costs agreement between a client and a barrister (s180(1)(b)); the costs agreement is written or evidenced in writing (s180(2)); and the costs agreement consists of a written offer that is accepted in writing or (except in the case of a conditional costs agreement) by other conduct (s180(3)). The following points are also noteworthy: A costs agreement may be enforced in the same way as any other contract <ahref=”http://classic.austlii.edu.au/au/legis/nsw/consol_act/lpul333/s184.html” target=”_blank”>(s184). Addressing or providing an invoice to the instructing solicitor does not make the solicitor liable for counsel’s fee. Section 178(1)(c) (bar on commencing or maintaining proceedings) applies only if there has been a contravention of disclosure requirements, and will require consideration only to the extent that compliance of a law practice with disclosure obligations is put in issue. Even in circumstances where a law practice retains a barrister but the obligation to pay the barrister falls directly on client, disclosure obligations under s174 still fall on the law practice – the barrister is only required to make limited disclosure to the law practice under s175(2). Additionally, solicitors intending to opt-out of being liable for counsel’s fees must ensure that both counsel and the client are on board with the tripartite agreement. Solicitors should also accept the risk that barristers may refuse a brief due to higher credit risks associated with individual debtors. At Blackstone Legal Costing we guide you through the labyrinth that is cost law to achieve optimum recovery for both you and your clients. Dipal Prasad A senior associate with us at Blackstone Legal Costing, Dipal’s experience ranges across New South Wales, Queensland, the ACT and Victoria. Frequently an advocate in Victoria’s Costs Court, Dipal’s skills focus on resolution of commercial costs disputes.

BStone Admin | 16 Sep 2019
Blackstone Brief Volume 14

is month’s Blackstone Brief one of our senior associates, Romaine Abraham, takes a close look at the perspectives on a taxation of costs in the Federal Court of Australia in 2019. It is relatively rare for costs disputes between parties in the Federal Court of Australia to end up being taxed. Estimates now issued by Registrars as to what proportion of costs disputed by parties will be allowed have ensured that far fewer matters reach taxation. Matters do, occasionally, reach a full taxation and, having appeared in a taxation of costs listed in the Federal Court over 25 days this year, I am uniquely placed to share information about how the Court is currently interpreting the Federal Court Scale of Costs. Legislative penalties disincentivise parties from proceeding with a taxation of costs in the Federal Court, ensuring that fully contested taxations are the exception, not the rule. Before a Bill of Costs can be taxed, rule 40.20 of the Federal Court Rules 2011 (the Rules) requires a taxing officer to make an estimate of the approximate total amount for which a certificate of taxation would likely be issued. If the party which filed the bill and is seeking to recover its costs files an objection to the estimate under rule 40.21 , it must pay the costs of taxation of all parties unless the costs are taxed at more than 115 percent of the taxing officer’s estimate. If the party liable for costs files the objection, it must bear the costs of taxation unless costs are taxed at less than 85 percent of the taxing officer’s estimate. Costs as between party and party in the Federal Court are defined in the Rules as costs. The Scale of Costs, found in Schedule 3 of the Rules, is used to quantify the amount payable. Here are some insights into how the Scale is currently interpreted. Multiple fee earners A claim for multiple fee earners to attend at hearings and conferences is generally disallowed in inter partes costs assessments conducted in the New South Wales, Queensland and Victorian state courts, particularly in the absence of an order that costs be paid on an indemnity basis. In the Federal Court, matters of sufficient complexity give merit to the argument that the costs of having multiple solicitors attend conferences, for example with counsel, are incurred fairly and reasonably in the conduct of the litigation. This has important significance for large commercial disputes where teams of lawyers now routinely work together to ‘divide and conquer’ large swathes of evidence. Delegation and supervision As a corollary to this, it is clear that the Federal Court Scale of Costs makes provision for delegation and supervision when it is considered appropriate for more than one lawyer to be involved in the conduct of a matter – see scale item 4 Delegation and Supervision. To ensure clarity, any attendance claimed under this category should clearly be marked as being claimed in accordance with scale item 4, rather than simply marked as being claimed in accordance with scale item 1, and provide a taxing officer with sufficient information to understand the nature of the attendance claimed. Reading In relation to reading, a subsequent attendance can be claimed to review a document in addition to the first attendance to read that document on its receipt. Such attendances will be considered and allowed on a case-by-case basis and in the context of the duration and complexity of the substantive proceedings. There are certain limitations on such multiple reviews of the same document, as noted below when preparing documents. Again, this differs from the manner in which inter partes costs are allowed on assessment in New South Wales, Queensland, and Victoria, where only nominal attendances are permitted to review documents previously read, as part of a review of the file in its totality and typically in preparation for the hearing. Occasionally, a claim may be made to read an email in one item and read the annexures to that email in a second item. However, simple emails attaching more detailed documents, such as correspondence, are considered to have been read at the same time as the documents being forwarded. While this appears to be a minor point to concede, this type of claim can increase the total amount claimed by a significant amount. Any nominal attendance to read a covering email should not be claimed as a separate attendance, as these costs will most likely be disallowed on taxation. Preparing documents Similarly, separate claims for outgoing emails that simply attach documents, in addition to claims for preparation of the attachments, are typically disallowed as having been incorrectly claimed under scale item 2. Scale item 20.3 states: ‘the charge for preparing documents (item 2) is inclusive of typing, printing, posting, faxing and emailing, and any other administrative task relating to the preparation or transmission of a document, by whatever means. There is to be no charge for such administrative tasks.’ Furthermore, attendances claimed to review material for the purpose of preparing documents, such as in preparation for drawing a Statement of Claim or Defence, are generally disallowed. Such attendances are considered misapplication of the scale, leading to duplication of the initial attendance to peruse such documents on their receipt. Associated attendances undertaken in connection with preparing documents is arguably captured in the various rates allowed at scale item 2. The preparation of some documents which might otherwise have been considered merely internal management aids, such as file notes, are now routinely being allowed on a party-and-party basis, particularly in complex matters, when such documents assist a party in conducting the litigation more efficiently. If in doubt as to whether the preparation of an internal document can reasonably be claimed, I would advise including claims for preparation of such documents within your Bill of Costs, as such costs are likely to be allowed where their preparation has a bearing on the efficient conduct of the matter. Important tips to remember Maintaining accurate time-recording practices, such as noting the start and end times of attendances on file notes, greatly assists a party in substantiating costs claimed within their Bill of Costs and will facilitate a higher recovery of costs on taxation or costs assessment regardless of the jurisdiction in which the costs dispute arises. Importantly, parties should review any adverse costs orders prior to final orders being made, as final orders can sometimes overturn earlier orders. Parties should make every effort to ensure that contentious categories of costs are either expressly carved out or expressly included, with relevant justification, to guarantee that costs recovery is appropriate and maximised. Ultimately, parties should have regard to the overarching purpose of the civil practice and procedure provisions, be realistic about the manner in which costs are claimed as between party and party and avoid misuse or misapplication of the Federal Court Scale of Costs. At Blackstone Legal Costing we guide you through the labyrinth that is cost law to achieve optimum recovery for both you and your clients. Romaine Abraham An experienced senior associate at Blackstone Legal Costing, Romaine commenced work with us in our Melbourne office and is now based in our Sydney office. Her experience ranges across New South Wales, Victoria and Queensland, focussing her skills on obtaining the best commercial results for clients

BStone Admin | 13 Aug 2019
Blackstone Brief Volume 13

rime, takes a close look at the recent case of Wiltshire v Amos & Anor, a recent authority in the Supreme Court of Queensland dealing with multiple legal costs issues. If you’d like more information like this on a range of topics, check out Blackstone’s new FAQ page, where you can find useful information on all of these topics: Recovering legal costs What is the process for recovering fees? What is the timeframe for fee recovery? Benefits of Assessment vs Taxation or Costs Assessment Bill of Costs How to get your file costed? When to cost a file? Security for costs expert Legal Cost Budgeting Do you have a costs order? Expert Reports – Gross Sum Applications Wiltshire v Amos & Anor As well as being a novel matter (the application for appeal was brought a staggering 7 years after the costs order!), the case demonstrates fundamental and universal considerations of Courts when determining the reasonableness of legal costs and disbursements. Although the matter was heard in Queensland, principles considered within the judgment can be applied to all states and territories. In this case, his Honour Justice Crow shed light on issues often contemplated by our clients in every state, such as the recoverability of fees for multiple Counsel and the entitlement to recover unpaid disbursements. The judgment demonstrates the difficulty faced by legal practitioners in determining what is and what is not recoverable. In a nutshell: During a lengthy litigation against Monsour Legal Costs, the Applicant, Mr Edward Amos, briefed Mr Christopher Wiltshire of Counsel to advise and appear on his behalf in District Court proceedings. On or about 2nd June 2009, a one-day trial took place at the District Court and judgment was made in favour of Monsour Legal Costs. Mr. Amos subsequently brought an action in negligence against his now former barrister, Mr. Wiltshire. Mr. Amos made serious allegations asserting that Mr. Wilshire was both incompetent and dishonest. Judgment was delivered in the first instance in favour of Mr. Amos, with the District Court ordering Mr. Wiltshire to pay Mr. Amos damages in the sum of $114,302.17. On appeal to the Court of Appeal, this decision was set aside and a new trial was ordered. Speaking to the credibility of Mr. Wiltshire, combined with an acknowledgment of his experience spanning some 10 years, Muir JA opined in Wiltshire v Amos [2010] QCA 294 at [42] that Mr. Wiltshire’s evidence regarding the drafting and briefing of critical Affidavits was to be preferred over that of Mr. Amos. The Court also directed Mr. Amos to pay Mr. Wiltshire’s costs of the appeal. Seven years and 8 months later, Mr. Amos applied for a review of costs as assessed by the second respondent in this matter, the Court appointed cost assessor Mr. Edward Skuse. Mr. Amos’ application was dismissed for reasons set out below in the decision of Wiltshire v Amos & Anor [2018] QSC 224. Do Costs Respondents have a right to seek a review of a Cost Assessor’s decision? Crow J discussed the ambit of Regulation 742, the right of a dissatisfied party to seek a review of a cost assessor’s decision. His Honour noted that the Court will review a decision of a Taxing Officer where it has been alleged that the Officer has proceeded on a wrong principle and, as such, an error has occurred in determining whether an item should be allowed. However, where no principle is involved, the question for the Court’s determination is whether the Taxing Officer has correctly used their discretion. Referring to the judgment of Jordan CJ in Schweppes Ltd v Archer(1934) 34 SR (NSW) 178, his Honour remarked upon the Court’s reluctance to review the decisions of Taxing Officers unless it appears that the Officer has either failed to exercise their discretion or has done so in a manner which is manifestly erroneous. The onus of proving such conduct rests on the party seeking the review. Crow J held that Mr. Amos had not successfully established that the cost assessor had failed to apply, or had incorrectly applied, his discretion. Are unpaid disbursements recoverable? Mr. Amos mounted an argument that disbursements totalling $123,085.90 were not assessable, as proof that the disbursements had been paid had not been provided to the costs assessor. Despite strong and meritorious arguments raised by Mr. Harrison QC on behalf of Mr. Amos, His Honour Crow J held at [26] that the clear and unambiguous language of r723 of the Uniform Civil Procedure Rules 1999 provides authority on whether unpaid disbursements are assessable. This rule states: * If a party’s costs statement includes an account that has not been paid, the party may claim the amount as a disbursement. * A costs assessor may allow the amount as a disbursement only if it is paid before the cost’s assessor signs the certificate of assessment. * Subrule (2) does not apply to an amount for lawyers’ or experts’ fees. His Honour further provided that, as r723 states that the necessity that a disbursement be paid is not applicable to lawyers’ and experts’ fees, this is essentially a matter of discretion for the cost’s assessor. His Honour stated, obiter dicta, that the purpose of rule 723 is to prevent the disadvantage of impecunious parties. The test for the Court’s involvement in the review of a costs assessor’s decision was again reiterated by his Honour with reference to disbursements. His Honour held at [28] that ‘the Court will interfere only where it appears the discretion has not been exercised at all or has been exercised in a manner which is manifestly wrong’. In so doing, the second ground of appeal raised by Mr. Amos was dismissed. Are the costs of more than one Counsel recoverable? In responding to the submission made by the Applicant that two counsel ought not to be allowed on assessment, his Honour stated that the relevant test is ‘whether the nature and circumstances of the case are such that services of two counsel are required if the case is to be presented to the Court in such a manner that justice can be done between the parties’. Noting reliance upon the judgments in Stanley v Phillips [1966] 15 CLR and Kroehn v Kroehn (1912) 15 CLR 137 by the Applicant, his Honour held that the costs assessor was correct in establishing and applying the principles of these cases. Notably, his Honour held that the relevant considerations when evaluating the reasonableness of the engagement of two counsel should rest upon the complexity of the matter, the nature of the conflict, the probable duration of the trial and the general practice of briefing two counsel. What if costs claimed exceed damages awarded? The Applicant argued that as the costs assessed exceeded the award of damages ordered by almost $16,000, such costs were disproportionate to the amount in issue. The Court held that the quantum of the subject matter in issue is not the sole factor relevant in determining the reasonableness of costs and, in any event, “the matter was of the utmost importance to Mr. Wiltshire and of general importance. Left uncorrected and because of Mr. Amos failure to meet his disclosure obligations, Mr. Wiltshire, as a barrister, faced the unattractive prospect of having a published judgment questioning his credibility and his competence as a barrister”. As such, the costs claimed were held to be justly and reasonably incurred despite the proportionality question raised. Should GST be claimed? The Applicant also raised the issue of GST, asserting that, as the Respondent had not yet paid the costs claimed he could theoretically claim input tax credits once the costs were paid. The effect of this being that, if allowed on assessment, the Respondent might be enabled to recover greater costs than those paid. The Applicant invoked the costs indemnity principle – that a party cannot profit from the recovery of costs from another party. As Mr. Wiltshire had provided the Court with an undertaking that he would not claim input tax credits on disbursements paid on behalf of the Applicant, the Court held that the Applicant could not demonstrate that the cost assessor had wrongly exercised his discretion. Given Mr. Wiltshire’s professional obligations of candour to the Court as outlined by the Legal Profession Act 2007(QLD) and the Bar Association of Queensland Barrister’s Conduct Rules, the Court was satisfied that such an undertaking was sufficient. Judging fees by reference to current levels The Applicant argued that the cost assessor was mistaken in evaluating the reasonableness of professional fees by considering the current market rate of fees as opposed those of 2010. With reference to the professional qualifications necessary of costs assessors, including their in-depth knowledge of appropriate rates of solicitors and Barristers, the Court held that there was no material evidence to suggest that the cost assessor had erroneously applied irrelevant market rates in making his assessment. Crow J reiterated the fundamental principle of costs recovery as was stated by the Court of Appeal in Chong Herr Investments Ltd v Titan Sandstone Pty Ltd [2007] QCA278: ‘The successful party should not have been put to the expense of litigation, and it should be indemnified in respect of the costs which it has reasonably incurred in order to establish rights contested by the unsuccessful party’ On obligations to disclose costs to sophisticated clients The final point of contention dealt with in this appeal was the reliance of the costs assessor on costs disclosure material not provided to the Applicant. The Applicant submitted that Mr. Wiltshire’s failure to comply with the requirements of costs disclosure pursuant to s308 and s310 of the Legal Profession Act 2007 (QLD) meant that, as per s316, costs claimed were not payable. His Honour held, at [69], that s311 of the Legal Profession Act creates an exemption to disclose to sophisticated clients, including legal practitioners. Therefore, the duty to disclose was not applicable in this case. Furthermore, his Honour noted at [65] that the effect of s316 ‘is not to render Counsel’s fees unobtainable on assessment but merely that they must be a different type of assessment, namely a Division 7 assessment’. Finally, his Honour highlighted the enforceability of costs agreements afforded to Barristers by virtue of s326 of the Legal Profession Act 2007 (QLD) . Observing that, under s326, a Barrister may enforce a cost agreement in the same way as a contract. The discretion given to the cost assessor by regulation 723 of the Uniform Civil Procedure Rules 1999 (QLD) allows for the recovery of disbursements such as counsel’s fees that have not yet been paid. Take a look at Volume 11 of the Blackstone Brief for more information on the importance of costs disclosures and the effects of Conditional Costs Agreements: http://www.bstone.com.au/conditional-costs-agreement/ What does this mean for you? The judgment of this case raises several important considerations regarding cost law. It is clear by his Honour’s comments throughout the judgment that the Court is committed to the indemnity of successful parties. As such, they are reluctant to interfere with the decisions made by cost assessors provided that those decisions are made on reasonable grounds. The overarching principles enunciated by this case suggest that the Court’s considerations are predominantly whether cost assessors have in fact utilised their discretion and, in doing so, have applied this discretion correctly. His Honour’s comments on the recovery of costs yet to be paid suggests a real ‘substance over form approach’ has been applied. Again, the main consideration being that successful parties are indemnified appropriately. The same can be said about the Court’s judgment on the use of two Counsel. Despite the Court’s commitment to the facilitation of quick, cheap and just litigation, it is evident that appropriate representation and the prevalence of justice are imperative. From a legal costs perspective, it is reassuring to note that litigants involved in highly complex matters which merit or indeed require the use of more than one Counsel will not be penalised. It is also clear from the decision of Crow J that the Court is inclined to allow recovery of full legal costs charged when all requirements are met. However, drafting a Bill of Costs to meet this threshold can be taxing without an in-depth knowledge of cost law. Inadequately drawn Bills of Costs or Costs Statements can lead to, both, substantial losses of costs claimed and a delay in recovery of those costs. At Blackstone Legal Costing we guide you through the labyrinth that is cost law to achieve optimum recovery for both you and your clients. For more information on how costs are assessed in your state click the link below for a helpful explanation: http://www.bstone.com.au/blackstone-brief-volume-8/ Fiona Trime Fiona graduated from the London School of Economics and Political Science in 2013 with a Bachelors Degree in Social Policy and Government. She has since moved to Sydney to pursue a career in law and has recently completed the Juris Doctor Degree at Macquarie University. Fiona joined Blackstone’s Sydney team as a paralegal in 2018 with previous experience in civil litigation and immigration law. She has since developed costing skills, having worked on a range of matters from personal injury to planning law. Find Out More (http://www.bstone.com.au)

BStone Admin | 12 Jul 2019
Blackstone Brief Volume 12

Joe Rose, a UK Costs Lawyer, has joined Blackstone’s Sydney office following 4 years managing the London office of an affiliated UK costing firm, Partners in Costs. The UK and Australian legal costs regimes follow remarkably similar rules and authorities. In this article Joe casts his eye over the more significant differences, raising questions about where legal costs are headed down under. There are some things upon which Brits and Aussies just don’t see eye to eye. Vegemite or marmite? Who is better at cricket? How do you pronounce data? The list can go on and on. Proportionality in costs is another, less commonly debated, point of difference. Rules In simple terms, factors to be taken into account when determining the reasonableness in each jurisdiction include: England and Wales Australia S.44.3(5) Civil Procedures Rules: S.172 (2) Legal Profession Uniform Law (NSW) 2015 The sums in issue in the proceedings. Value of any non-monetary relief. The complexity of the litigation. Additional work generated by the paying party, and Wider factors e.g. reputation or public importance. The skill, experience, and expertise of the lawyers involved. The complexity/novelty of the issues involved, including public interest. The labour/responsibility involved. The case circumstances, including; its urgency. the time spent. the place where the work was done. The quality of the work done. Similarities When it comes to consideration about whether costs incurred are proportionate to a matter, both jurisdictions centre on the complexity and public importance. Few will argue these are factors that shouldn’t be taken into account. It is also important to note that, regardless of proportionality, both jurisdictions similarly determine the allowance of costs by considering whether they are fair and reasonable. However, that is effectively where similarities end. CPR44.4(3) does sound much like the Australian rules, with recognition given to both the skill and expertise of the lawyers involved as well as the time spent on the case when considering the overall reasonableness of the costs claimed. Yet, the jurisdictions diverge significantly on interpretation and application of rules relating to proportionality. The sheer amount of time spent by England and Wales, in applying, revising, amending and generally arguing over the issue of proportionality provides one major contrast with the Australian experience. Entire days can be spent at a preliminary hearing simply determining whether costs are proportionate. Whereas in Australia decisions on proportionality tend to be made much more succinctly and are of relatively less importance in decision-making on costs, certainly involving far less adversarial work. Another significant difference: upon deciding that costs are disproportionate, Australian costs assessors generally have far greater discretion in deciding how to apply this to the costs claimed. In contrast, Costs Judges in England and Wales apply far more strictly the relevant rule as to proportionality, CPR 44.3(2)(a): “…on the standard basis, the court will – (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred”. Damages vs Costs Analysis British practitioners will be surprised that, in practice, costs assessors in Australia place much less emphasis on considering the relationship between verdict sums in issue and costs claimed than their English and Welsh cousins. “How can it be reasonable to have incurred X in costs when only Y was at stake” is, aside from the usual questions over the retainer, invariably the most important issue a paying party raises with a costs assessor in England and Wales, and it is an issue that resonates throughout assessment proceedings there. There is obviously commercial sense to this. If you are defending a claim worth $100,000 you would obviously prefer not to spend $150,000 in legal costs and risk having to incur all these costs, plus those of the winning party if you lose. Yet purely basing the outcome of a costs assessment on proportionality overlooks countless other factors and almost ignores basic principles like access to justice. To consider how strict rules on proportionality create injustice, take the case of two sets of parties involved in property disputes. In each case ownership is the sole basis of the dispute. The only difference is one property is located in Penrith, where it is valued at $1,000,000, with the other located in Bondi, where that property is valued at $2,000,000. How can it be just to assert that one winning party is restricted to one-half of the legal costs of another party despite being just 65 kilometres away? In England and Wales, this can often be the reality. The value of any claim can be significantly impacted by numerous socio-economic factors unrelated to the amount of legal work required to prosecute it. This is presumably why Aussies have disagreed with the Brits and decided such a system, regardless of the cost, just wouldn’t be fair. The Necessity Test In England and Wales, necessity played a key role in determining which costs were to be allowed. That was the case until the introduction of the Jackson reforms in 2013 when, to all intents and purposes, the requirement of necessity was scrapped. This was because it was considered that any costs that are reasonably incurred will be necessarily incurred and vice versa, making the distinction redundant. This was the view of Lord Jackson, the driving force behind the biggest costs reforms in England and Wales in over 20 years. The introduction of CPR 44.3(2)(a) above clearly sets aside the question of necessity. Australia has also done away with necessity, but for different reasons. It had only been applicable in relation to Federal Court costs up to 2011, at which point the rule makers decided the test was too onerous on parties entitled to costs of litigation and the threshold to satisfy was that costs should simply be those that have been fairly and reasonably incurred by the party in the conduct of the litigation. Budgeting In England and Wales, since April 2013 Costs Lawyers have been involved from the point of initial directions hearings, at which point costs budgets are prepared for the anticipated duration of each matter and fixed by the Court. It is generally very difficult to deviate from budgets once set by the Court. Given that costs budgeting in Australia don’t yet exist the difference here is quite clear. There are many assertions that budgeting has been a rip-roaring success in ensuring proportionate costs, most notably from Lord Jackson, the architect of the reforms which included costs budgeting. Unfortunately, the fact that the Courts in England and Wales have been slow to take up computerised filing means there has been no central benchmarking to verify such claims. Furthermore, the process has in some areas increased costs as an assessment process at the end of cases invariably proceeds, creating further costs in addition to those incurred in preparing a budget (which can be considerable). Despite attestations by some individuals that various new costing rules have worked, it remains unclear whether these new rules have successfully lowered costs or maintained them at a fair and reasonable level. It is unlikely this will never unlikely be proved one way or another until or unless proper benchmarking is carried out at a centralised level. Implications for Australia Australia has the benefit of being able to wait and see how new policy reforms in the UK develop and how they impact litigation. The opportunity to consider how the Jackson Reforms have affected England and Wales, to learn what has worked and what hasn’t, is truly beneficial to policymakers here. The ripple effect of further changes, including the introduction of fixed costs based on the concept of proportionality, may be enormous and is already starting to be felt in terms of access to justice. These effects include a reduction in the level of work for the junior bar, a reduction in the number of valid claims and an increase in the number of litigants in person as a consequence of law firms seeing little or no profit to be made in claims. An important question for Australia is whether it wants to achieve reductions to legal costs in litigation at the expense of access to justice, which appears to have been the case in England and Wales following the Jackson Reforms.

BStone Admin | 03 Oct 2018
Blackstone Brief Volume 11

of our Melbourne Associates, Chris Grisenti, reviews two cases relating to the specific requirements of a law practice relating to charging an uplift fee when entering into a conditional costs agreement. Conditional costs agreements are the most common agreements between a client and a personal injury firm. These agreements are routinely entered into in matters relating to traffic accidents, WorkCover disputes and medical negligence claims, to name a few practice areas. Under the Uniform Law, as was the case under the Legal Profession Acts in NSW and Victoria, firms are able to offer costs agreements pursuant to which clients are only liable to pay professional fees, disbursements, or both, on the basis of a successful outcome. The definition of a successful outcome varies from firm to firm. However, a common requirement is that the Plaintiff client receives or is awarded monetary damages from the Defendant. Incentivising law practices to enter into conditional costs agreements, such agreements entitle firms to charge an “uplift” on the solicitor/client professional fees. This uplift is an additional percentage of between 0% to 25%, calculated on professional fees only. It cannot be applied to disbursements. Compliant conditional costs agreements come with special provisions, meaning law practices must comply with additional requirements when entering into conditional costs agreements not necessary for costs agreements charging no uplift fee, typically referred to as “standard” costs agreements. Requirements relating to uplift fees are found within section 3.4.28 of the Legal Profession Act 2004 (Vic), and section 182 of the Uniform Law. Russells v McCardel [2014] VSC 287 (23 June 2014) This matter came before Justice Bell in the Supreme Court of Victoria following an appeal from the decision by Associate Justice Wood in the Costs Court. Russells, a legal practice, acted on behalf of the Respondents in complex Supreme Court proceedings. Following resolution of the substantive proceeding, the Respondents were provided with an itemised bill totalling $617,912.10. This bill was drawn pursuant to a conditional costs agreement, which had contained an estimate of the uplift fee in percentage terms, as well as an estimate of the total costs. The Respondents sought a review of the costs claimed by the Applicant, and contended the agreement was void. This review was made under section 3.4.38 of the LPA. In the first instance, Associate Justice Wood upheld the claim by the Respondents, and ordered the Applicant to file and serve a bill on the applicable scale of costs. One of the Respondents’ contentions was that the agreement did not contain a proper estimate of the uplift fee. Pursuant to section 3.4.28 (3) of the LPA, “The agreement must contain an estimate of the uplift fee…or a range of estimates”. This section is also included in the Uniform Law at section 182 (3). Justice Bell stated (at [39]): “The estimate of the uplift fee…must be an amount. This requirement is inherent in the concept of an uplift fee. A percentage is a basis of calculation, not an amount” The particular difficulty faced by the Applicant was that the estimated amount provided to the client in their disclosure statement was an amount for both professional fees and disbursements. It was found that, as the estimate of total legal costs provided included both professional fees and disbursements, it was not possible to use the percentage of the uplift to work out an estimate of the uplift fee. His Honour dismissed the firm’s appeal and further stated: “it is the mandatory responsibility of the lawyer to apply his or her mind to the likely actual amount of that fee and disclosure in the agreement an estimate that reflects an approximate judgment or opinion on that subject”. Michael Rafati v Robinson Gill Lawyers (unreported) This proceeding, governed by provisions of the Legal Profession Act, came before Associate Justice Wood of the Costs Court in 2017. The Applicant had engaged the Respondent firm to act for him in relation to his WorkCover claim. The Respondent acted in relation to the Applicant’s impairment benefits claim, weekly benefits claim, appeal to the Supreme Court from a medical panel decision, and a County Court damages writ. The Applicant terminated the conditional agreement he had entered into with the firm and, following production of an itemised bill calculated pursuant to the conditional costs agreement, a review application was filed in the Costs Court. The proceeding was listed for a preliminary hearing as to the validity of the Respondent law firm’s conditional costs agreement. The estimates of costs provided by the Respondent in the conditional costs agreement did not expressly state whether they were inclusive or exclusive of disbursements. Further, the disclosure statement made reference to the uplift being calculated on “total costs to be charged, excluding paid disbursements”. The Court considered whether this offended the LPA, as it may have conveyed an impression the uplift would be charged on unpaid disbursements, but ultimately made no ruling on this issue (at [8]). The Respondent attempted to distinguish this matter from McCardel, on the basis that the estimate did not refer to disbursements, and, by implication, only related to professional fees. It was argued that, as there was a base figure in the estimate upon which to calculate the uplift, the agreement did comply with the relevant conditional costs agreement provisions of the LPA. The Court did not accept these submissions, and stated: “The estimates are to be assessed objectively from a client’s perspective. They are expressed in such a way as to convey that the estimates are for total legal costs, and therefore contain both professional costs and disbursements”. The Take-Home Message It is clear from these cases that, if a firm wishes to charge a client an uplift fee, then they must provide not only an estimate of total legal costs but also an estimate in a monetary amount for the uplift. Whilst these two cases both relate to provisions in the LPA, the Uniform Law contains almost identical provisions. It is therefore likely the Costs Court and costs assessors in New South Wales will continue to apply these principles to agreements entered into under the new legislation. Firms which enter into conditional costs agreements with clients should review their current agreements to ensure they do not offend these principles, as there can be significant penalties for non-compliance. For assistance in reviewing your costs agreements, and all other costs-related needs, contact the experts at Blackstone Legal Costing – Your Costs are Our Priority. An before we finish this month’s edition, a further note from our editor: Check out how costs are assessed in your state here… http://www.bstone.com.au/blackstone-brief-volume-8/

BStone Admin | 18 Jul 2018
Blackstone Brief Volume 10

their legal costs in exchange for a percentage of any judgment sum obtained or settlement amount reached if the case is successful. This is a relatively unregulated industry, but change is afoot. In this month’s issue, Fiona Trime and Mike Dudman from our Sydney office take a closer look at the funding of litigation in Australia and where it’s headed.   Background Despite historical scepticism toward funders of litigation, the common law doctrines of maintenance and champerty prohibiting profiteering from litigation were abolished in New South Wales by The Maintenance, Champerty and Barratry Abolition Act1993 (NSW). The Act constituted a turning point for class actions and insolvent litigants, as did the High Court’s decision in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd  (2006) 229 CLR 386, which confirmed the Court’s view (at [432-433]) that litigation funding was neither an abuse of process nor contrary to public policy.   Litigation funding has since become big business in Australia. Already a global phenomenon, a recent increase in Australian companies funding international suits has also led the industry to being dubbed an “Australian export” (Michael Legg et al, ‘The Rise and Regulation of Litigation Funding in Australia’ (2011) 38 Northern Kentucky Law Review626,629). Notwithstanding the apparent Court approval for such schemes, concerns have been raised regarding appropriate levels of regulation required to ensure that litigation funding does not undermine the objectives of litigation and the Court’s process. Why Regulate? In response to criticisms of the sector, by 21 December 2018 the Australian Law Reform Commission will deliver a Report to the Attorney General following its inquiry into class actions and third party litigation funders:                “The aim of the inquiry is to ensure that the costs of class actions are ‘appropriate and proportionate and that the interests of plaintiffs and class members are protected’. The Attorney has asked the ALRC to consider ‘whether and to what extent class action proceedings and third party litigation funders should be subject to Commonwealth regulation, with reference to specific matters that have arisen including the proportionality of lawyers’ costs and the lack of ethical constraints on their operation such as those binding legal practitioners’.” (Attorney-General media release, 15 Dec 2017.) The extent to which litigation funders should be subject to regulation and the extent of any conflicts of interest between litigation funders and plaintiffs, are a key focus of the inquiry. This conflict issue was recently highlighted in proceedings in the Supreme Court of New South Wales: In the matter of Legal Practice Management Group Pty Ltd, nSynergy Pty Ltd, nSynergy International Pty Ltd [2018] NSWSC 527 (27 April 2018). In these proceedings, the Court went to great lengths to consider the conflict between a term of a litigation funding agreement and a Plaintiff’s obligations under s56 of the Civil Procedure Act 2005 (NSW) (“Act”). That term purported to provide the funder the right to give day-to-day instructions to the Plaintiff’s solicitors and to make binding decisions on behalf of the Plaintiff in relation to any matter relating to the proceedings. The Court recognised a potential conflict with s56 of the Act, which imposes on a party to civil proceedings a duty to assist the court to further its overriding purpose – to facilitate the just, quick and cheap resolution of the real issues in the proceedings. A further potential conflict arose with r 3.1 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015, which provides that a solicitor’s duty to the Court and the administration of justice is paramount and prevails to the extent of inconsistency with any other duty. The Court was ultimately persuaded in nSynergy that a parties’ obligations to the Court overrode its contractual obligations to a funder. Other authorities provide litigation funders avenues to argue that obligations already imposed by the Courts and legislation effectively regulate the industry. In Jeffrey and Katauskas Pty Limited v SST Consulting Pty Limited (2009) 239 CLR 75, it was established that a third party litigation funder was under no obligation to ensure that a litigant they funded was able to meet an adverse order for costs. This was supported by Rule 42.3 of the Uniform Civil Procedure Rules 2005 (NSW) preventing orders for costs against non-parties. This rule has since been repealed, allowing the New South Wales Supreme Court to use its discretion under s98 of the Act. The Victorian Court of Appeal considered this discretion in detail in Carter v Caason Investments Pty Ltd [2016] VSCA 236, holding that, if a litigation funder “was not merely a passive funder but by reason of what it stood to gain, the funder could properly be characterised as a party to the proceeding”, it should utilise its discretion under s98 of the Civil Procedure Act to order costs against the funder. The provision of security for costs by third parties for potential adverse cost orders has recently been considered by the Courts in cases such as Petersen Superannuation Fund Pty Ltd v Bank of Queensland Limited [2017] FCA 699. In this case, the Federal Court considered the adequacy of an “After The Event”(ATE) insurance policy offered by the funder (a policy insuring against an adverse costs order) as security for costs in the amount of $578,000. The Court ultimately determined that such a policy could, in principle, provide such security but that the policy in question provided insufficient security: the funder having no assets within Australia. This issue also was discussed in DIF III Global Co-Investment Fund LP & Anor v BBLP LLC & Ors [2015] VSC 484, where the Court held that a proposed deed of indemnity should include a provision submitting to the jurisdiction in which the proceedings are taking place. It was noted in this case that although payment of cash or a bank guarantee was the preferred form of security, the Court’s primary concern was that justice was unfettered by the requirement to provide security. This was echoed by the Court in Australian Property Custodian Holdings Ltd (In Liquidation) v Pitcher Partners (a firm) & Ors [2015] VSC 513 in which it was held that, providing the object of security was achieved, its form should be that which is least disadvantageous to the plaintiff. As it stands, applications for security for costs imposed on a third party funder are dealt with on a case by case basis by the Courts. The nature of Court-ordered security for costs are, however, potentially problematic for a plaintiff of a class action suit. Although security provided by a litigation funder might cover the legal costs incurred by the defendant of the proceedings, they do not necessarily extend as far as guaranteeing the legal costs of the plaintiff without an ATE policy in place. Licencing on the Way As such, the Australian Legal Reform Commission has raised important questions to be answered in their report concerning the potential regulation of litigation funders. The ALRC’s discussion paper into litigation funders has proposed the introduction of a licence for litigation funders, incorporated into the Corporations Act (2001) (Cth). One proposal is that funders undergo an annual audit as part of their licenced obligations, ensuring that the funder has met and continues to meet license conditions. It is envisaged that the introduction of license requirements would ensure that litigation funders operating within Australia are reputable and financially capable of meeting obligations made to clients and the Court.  It has been argued that, as there are no current licensing requirements imposed upon litigation funders, there are currently no minimum standards to be met. The introduction of regulated standards would be advantageous to the clients they serve – securing payment of their legal costs – and to defendants in situations where security for costs is ordered. The Courts’ willingness to grant orders for security for costs against third party funders has been influential in the argument against a regulatory scheme for litigation funders.  In their submissions to the Victorian Law Reform Commission, Slater and Gordon suggested that the Courts’ involvement in ensuring that an acceptable form of security is provided is sufficient protection for defendants from potentially unrecoverable costs orders as well as plaintiffs in ensuring the funder’s ability to pay the defendant’s legal costs. The outcomes of the Australian Law Reform Commission’s Inquiry are being cautiously welcomed by the established funders in Australia, as it appears some regulation is not only likely but also needed. Stay tuned for our report on the Inquiry’s findings in early 2019.              

BStone Admin | 16 May 2018
Blackstone Brief Volume 9

ssment on a gross sum basis are becoming a more popular instrument in dealing with costs disputes for successful parties. But are these applications a positive way forward when determining costs, or are they simply the latest “fad” in the legal profession? In this month’s edition of the Blackstone Brief one of our Melbourne Associates, Chris Grisenti, looks at a recent decision made in the Victorian Supreme Court in which we were involved, relating to an application for a gross sum order. What is a Gross Sum Application? An application for costs to be determined on a gross sum basis is one which is open to a successful party, with the assessment conducted by the trial judge on the parties’ evidence. Alternatively, the matter is referred to formal assessment elsewhere (in the case of Victoria, to the Victorian Costs Court). There are two ways in which a party can seek a gross sum assessment. Firstly, they can make the application and, if successful, file and serve expert reports as to quantum. Alternatively, the initial application can include evidence as to quantum with the application. There are benefits and drawbacks to both approaches. When making an assessment on quantum, the Court will apply a broad brush approach to the figures claimed. Further, the Court must be confident that the approach taken is logical, fair and reasonable, and that arbitrary discounts to the claimed amounts are not made. The purpose of a gross sum assessment was explored in the case of Sheehan v Brett-Young[2016] VSC 521. Wilson v Bauer Media Pty Ltd [2017] VSC 521 (13 September 2017) Between 2016 and 2017, the Plaintiff, Ms Rebel Wilson, alleged the Defendant in these proceedings ran a series of articles which were defamatory to her. The matter was tried before a jury, and the Plaintiff was successful. The Defendant subsequently agreed to pay the Plaintiff’s costs on an indemnity basis pursuant to s 40(2)(a) of the Defamation Act. On 3 October 2017, the Plaintiff’s lawyers provided a draft form of order which sought: 1. Costs in accordance with the terms of the retainer between the plaintiff and her legal representatives; 2. Costs to be assessed on a gross sum basis 3. Certification of counsel’s fees; and 4. Certification of one witness’ expenses. The Defendant disputed the orders sought by the Plaintiff, and further orders were agreed to for the provision of expert reports and an interlocutory hearing. The Plaintiff put forward an expert report by Ms Elizabeth Harris, which detailed the reasons why costs should be assessed on a gross sum basis (including the cost differences between the ordinary practice of taxation compared to a gross sum application). This report also explained the relevant methodologies for quantification, reductions to be made to the quantum of costs, and an amount which Ms Harris considered reasonable. Detailed submissions were also filed by the Plaintiff detailing why the Court ought to assess costs on a gross sum basis. The Defendant engaged Mr Paul Linsdell of Blackstone Legal Costing to review the report of Ms Harris, advise whether the matter was one which warranted the making of a gross sum order, advise whether the Plaintiff’s costs could be quantified, and advise on any other relevant matter. Mr Linsdell’s report the methodologies for calculation of costs on a gross sum basis, the issues with the Plaintiff’s expert report, and why the matter was not appropriate for assessment on a gross sum basis. The report also disagreed with the estimated costs of taxation and gross sum assessment which was contained in the Plaintiff’s report. The Defendant also filed written submissions on the issues in dispute between the parties. On 8 March 2018, Dixon J heard the Plaintiff’s application, and reserved his decision. On 12 April 2018, in Wilson v Bauer Media Pty Ltd (Costs) [2018] VSC 161, His Honour handed down judgment, and ordered that a gross sum application was not appropriate for the matter. Judgment His Honour found, substantially for the reasons set out by the Defendant, that this was not a case appropriate for departure from the usual procedure of taxation. These reasons were: 1. It could not be assumed that a gross sum assessment will be more time and cost efficient than a taxation, or that it will be simpler; 2. There was contested opinion from expert costs consultants about taxation or gross sum assessment; 3. Substantial costs would be incurred in making an assessment on a gross sum basis, including further expert reports and several days of court time; 4. An appeal by the Defendants was not an indicator of the likely approach to taxation; 5. The competing expert opinion was highly relevant, and that may in itself be a reason not to depart from the ordinary process of taxation; and 6. That an appeal to the Court of Appeal would not cause any relevant delay to a taxation. His Honour also noted that the level of disagreement between the costs experts showed a higher complexity in the assessment of a gross sum, and that this complexity would preclude his Honour from determining an appropriate sum without resorting to an unfair degree of arbitrariness. The case of WM Wrigley JR Company v Cadbury Schweppes Pty Ltd [2006] FCA 1186 was compared, and the requirement to arrive “at an appropriate sum on a logical and reasonable basis, rather than selecting figures at random on the basis of an arbitrary preference for one expert’s view over another’s.” The Plaintiff’s application was dismissed, and Dixon J also ordered that the Plaintiff pay the Defendant’s costs of the application. Whilst some matters are appropriate for assessment on a gross sum basis, the vast majority of matters are more properly dealt with in the usual course of taxation or costs assessment. For assistance with all your legal costing needs, including advice on whether a gross sum application may or may not be appropriate in your matter, contact Blackstone Legal Costing.

BStone Admin | 02 Feb 2018
Blackstone Brief Volume 8

ctoria, NSW and Queensland. Happy New Year! To kick off 2018 we thought we’d show you exactly how costs are assessed in three jurisdictions – Victoria, NSW and Queensland. In last month’s edition we looked at the procedural differences in each state. Now, read on to find out exactly who assesses costs in your State, how they assess them, and what you need to do to have an assessment reviewed. A guide to the legal costs recovery processes in Victoria, NSW and Queensland VICTORIA Who has the authority to assess costs? In Victoria, the Costs Court hears and determines all costs matters that arise from the State’s courts and tribunals. It also hears costs disputes between legal advisers and their clients. The Costs Court consists of an Associate Justice, a Judicial Registrar and two Costs Registrars. The Costs Court may reduce costs if it considers that they haven’t been reasonably incurred, that they’re excessive, or that they’re not reasonable or proportionate to the complexity, issue and amount in dispute. What test will a Costs Assessor apply? When assessing party/party taxations, the Costs Court will look at whether costs have been reasonably incurred and are of a reasonable amount. The costs of taxation will be calculated in line with the jurisdictional Scale of Costs: Order 63.36(5) of the Supreme Court Rules. What if you want to review an assessment? There is a 14-day time limit on seeking a review or reconsideration of a Costs Court order: Order 63.56.1  of the SC Rules. A Costs Judge, Judicial Registrar or a Costs Registrar has the power to review or reconsider their own decisions: Order 63.56.1 and Order 63.56.2 of the SC Rules. When a Judicial Registrar or a Costs Registrar reviews or reconsiders their own decision, a Costs Judge can, in turn, review this: Order 63.56.4 of the SC Rules. A Supreme Court Judge can then review a Costs Judge’s review or reconsider their own or a Judicial Registrar or a Costs Registrar’s decision: Order 63.57 of the SC Rules. Positives of Victoria’s model Negatives of Victoria’s model The limited number of decision makers facilitates a system that promotes uniformity and consistency. At mediation, the parties can ask for an estimate of the likely costs that will be allowed at a taxation. This can help resolve the matter early and cost-effectively.   If the amount of the professional charges and disbursements in any Bill of Costs is reduced by 15 per cent or more, the Costs Court has a discretionary power not to award any costs to the legal adviser, under Order 63.85 of the SC Rules. The Court must apply the Rule unless the parties’ submissions give it reason not to: Laro-Bashford & Ors v Mihos [2016] VSC 77 (7 March 2016). NEW SOUTH WALES Who has the authority to assess costs? In NSW, there are around 55 court-approved Costs Assessors. You can access a list of the Current Costs Assessors and the members of the Costs Assessor Rules Committee (CARC)​​ here. What if you want to review an assessment? Each party has 30 days to review a Cost Assessor’s Determination from the date the Court forward the Certificate of Determination to the parties: s 83 of the Legal Profession Uniform Law Application Act 2014 (LPULAA). A Review Panel constituted by two Costs Assessors will conduct the review (s 82 LPULAA), either affirming the Cost Assessor’s Determination or setting it aside and substituting the determination that, in its opinion, should have been made: s 85 LPULAA. Either party may appeal against a decision of the Review Panel to: (a) the District Court. However, it first must apply for the leave of the Court if the amount in dispute is less than $25,000, or (b) the Supreme Court. However, it first must apply for the leave of the Court if the amount in dispute is less than $100,000: s 89(1)(b) LPULAA. Positives of NSW’s model Negatives of NSW’s model Costs Assessors have a wide discretion, particularly when determining which costs are fair and reasonable: s 76 LPUL and s 172 LPULAA. Guidelines such as the Costs Assessment Rules Committee (CARC) Guideline for Costs Payable between Parties under Court Orders (Ordered or Party/Party Costs) assist with uniformity in a jurisdiction where this is a known issue. In contrast to Queensland’s system of default assessments, Costs Assessors in NSW are required by law to give each party a reasonable opportunity to make submissions and must give them due consideration: s 69(1) LPULAA. Although its practical application is unclear, Costs Assessors may choose to have an oral hearing. In considering these applications, the Costs Assessor won’t be bound by the rules of evidence and may inform themselves on any matter in the manner they see fit: s 69(1) LPULAA. There is no “15% rule” (at least not in a party/party costs assessment), whereby if the costs claimed are reduced by 15% or more, that party is likely to be required to pay the costs of costs assessment.   The wide discretion provided to Costs Assessors can have negative consequences as Costs Determinations and Reasons are not published. A high number of costs assessors  may compromise uniformity and consistency in decision-making. Blackstone Legal Costing comes across numerous determinations in which the same issue has been determined quite differently by different Costs Assessors. For example, one assessor relied on one authority in finding that identifying and collating annexures was administrative, not legal, work. This meant it was covered by the hourly rates and should not be separately claimed. In other costs assessments, similar costs have been allowed. In some assessments a reduction based on proportionality is applied, while another Costs Assessor has stated: “it is not permissible simply for me to reason that a bill of $50,000 is disproportionate to a claim in which $25,000 was recovered. That is the process of capping which is the province of the Court under section 98 of the Act and not one of assessment which requires a valuation of the work done”. There are few “case law” precedents based on actual Certificates of Determinations that can help with preparing submissions. In solicitor/client disputes, a legal practitioner must pay for the cost of a costs assessment, if their costs are reduced by 15% or more on assessment (subject to the Cost Assessor’s discretion): s 204LPUL. Despite the number of Costs Assessors, Costs Lawyers and Costs Consultants in NSW, the legal costs community is fragmented. This affects the uniformity of how testing costing principles and process are applied. Who has the authority to assess costs? In Queensland, there are about 45 court-approved Costs Assessors, including Blackstone’s General Manager and Costs Lawyer, Therese Tonkin. You can find the full register of Approved Costs Assessors here. How is a Costs Assessor appointed? In both standard and solicitor/client matters: If both parties agree to appoint a Costs Assessor, they can file a Request for Consent Order of Registrar with the registry (Form 59A Uniform Civil Procedure Rules 1999 (UCPR)). If they can’t agree on appointing a Costs Assessor, a judge or magistrate will appoint one at a directions hearing. In solicitor/client matters the court that will appoint a costs assessor depends on the amount of the Itemised Bill: If the Costs Statement is under $150,000 – the Magistrates’ Court. If the Costs Statement is between $150,000 and $750,000 – the District Court If the Costs Statement is over excess of $750,000 – the Supreme Court What will a Costs Assessor determine? In standard matters, a Costs Assessor will determine the costs of the Costs Assessment, as well as the liability of the parties to pay those costs. They will issue a Certificate of Costs within 14 days, a copy of which is provided to each party. The parties may apply to the Registrar for a Consent Order if they reach settlement before a Costs Assessor is appointed: s 666 UCPR. The Costs Assessor will issue a certificate in the accepted amount if settlement is reached after a Costs Assessor is appointed. What if you want to review an assessment? In standard matters: If you don’t agree with the Costs Assessor’s assessment of costs, you have 21 days after receiving it to request written reasons for the decision. The Costs Assessor then has another 21 days to provide them. If you’re still not satisfied with the assessment, you can ask a court to review it, so long as you’re within 14 days of receiving the Certificate of Costs or written reasons for the decision. In solicitor/client matters: You have 14 days after receiving the Costs Assessor’s certificate to request written reasons. Again, the Costs Assessor must supply these within 21 days. You can also ask a court to review the Costs Assessor’s decision within 14 days of receiving the Certificate of Costs or written reasons for the decision. The positives of Queensland’s model The negatives of Queensland’s model The appointed Costs Assessor decides the assessment procedure. In deciding this, the Costs Assessor may consider solicitor or counsel’s fees, the quantum of the costs, the parties’ interests, the way the matter was conducted, the quantum of the case, the nature and significance of the case, and any other relevant circumstances. Scale rates promote a uniform approach in claiming costs. As the ‘necessary and proper’ test is more stringent in standard costs matters (section 702 of the UCPR), Cost Assessors have limited scope for discretion.   The high number of Costs Assessors and decision makers makes it difficult to apply Scales and relevant principles in a uniform manner. If a party fails to serve a Notice of Objection within 21 days of being served with a costs statement), the other side can apply to the court to have a Costs Assessor conduct a default assessment. If the Costs Assessor is satisfied that the Costs Statement was correctly served, they will assess the costs without necessarily considering each item and issue a certificate for the assessed costs (including the costs of assessment). Considering the different tests for solicitor/client and standard costs disputes, it is difficult to convert a solicitor/client Itemised Bill into a standard Costs Statement. And finally… As you can see, each jurisdiction has its advantages and disadvantages. However, the one way to make sure you always capitalise on the strengths and avoid the pitfalls of the costs regime you’re working with, is to trust your costs to professionals like Blackstone. Lastly, check out the Australian Lawyers Alliance website for this and other interesting articles helping you to manage your practice.

BStone Admin | 09 Jan 2018
Blackstone Brief Volume 7

tate works differently. As 2017 comes to an end, we thought it was the perfect time to stop and take a breath, to set out what the main differences are between the three main jurisdictions we practice in – Victoria, NSW and Queensland.  We hope you find this guide, prepared by solicitors in our Sydney, Melbourne and Brisbane offices, both practical and useful. Thank you for your support over the past year. Have a wonderful holiday break and see you again in 2018! A guide to the legal costs recovery processes in Victoria, NSW and Queensland VICTORIA How are costs claims heard? In Victoria, the Costs Court hears and determines all costs matters that arise from the State’s courts and tribunals. It also hears costs disputes between legal advisers and their clients. The Costs Court was created by the Courts Legislation (Costs Court and Other Matters) Act 2008which created a new Division 2B in the Supreme Court Act 1986 (the SC Act). How do you commence proceedings? You will need to file a Summons for Taxation and the Bill of Costs. In party/party taxations you will also need to include an information form and the costs order, judgment or deed or release, and the filing fee. You won’t need to pay a fee for filing an application for a Summons for Taxation in a solicitor/client dispute, so long as you’re within the time limit. Clients in practitioner/client disputes must file an Application for Assessment of Costs within 12 months of a bill being provided to them. Clients can also make a complaint to the Office of the Victorian Legal Services Commissioner (VLSC) in relation to a costs dispute under some circumstances pursuant to Division 1 of Part 5.2 of the Legal Profession Uniform Law 2014 Clients can also make a complaint to the Office of the Victorian Legal Services Commissioner (VLSC) in relation to a costs dispute under Division 1 of Part 5.2 of the Legal Profession Uniform Law. Solicitors in solicitor/client disputes can only commence proceedings to recover costs claimed in a Bill of Costs 30 days after service of that document on a client, subject to provisions set out within section 194 of the Legal Profession Uniform Law. What happens next? All party/party Bills of Costs claiming less than $50,000.00 (including disbursements) will be sent directly to assessment: Part 8 of Order 63 of the SC Regulations. All party/party Bills of Costs of more than $50,000 will be listed for mediation: Order 50.07(1) of the SC Regulations. The Summons and Bill of Costs must be served at least 14 days before the hearing day named in the Summons: Order 63.38 of the SC Regulations. The Respondent must file and serve a Notice of Objection at least seven days prior to the mediation. Which Scale applies: Party/party costs? The scale that applies to party/party costs depends on which court you’re appearing in: For Supreme Court matters, you’ll find the scale of costs at Appendix A of the Supreme Court (General Civil Procedure) Rules 2015. For the County Court, costs are set out in the County Court (Chapter 1 Costs Amendment) Rules 2014. From 6 October 2014, they’re assessed at 80% of the Supreme Court scale. For Magistrates’ Court matters, you’ll find the scale of costs at Appendix A of the Magistrates’ Court General Civil Procedure Rules 2010. For Victorian and Civil Administrative Tribunal matters, costs are generally awarded on the County Court scale. Which Scale applies: Solicitor/client costs? In Victoria, solicitor/client costs are usually claimed pursuant to the costs agreement a legal adviser has with their client. The most common methods of charging legal work include: According to time: charging the actual time spent on a task and ultimately the matter. Rates will vary according to the size and location of the practice, and the experience of the practitioner providing the service. By reference to scale:  to the relevant scale of costs or Practitioner Remuneration Order. By fixed or flat fee: charging an agreed fee for the whole of the matter, for a stage or for a task. By conditional fee: where all or part of the fee is conditional on success or a specific outcome being achieved. The positives of Victoria’s model The negatives of Victoria’s model   The Costs Court is a centralised venue for dealing with all sorts of costs disputes. Provides a uniform approach to claiming costs – recoverable pursuant to Scales of Costs and assessed by one of four decision makers (an Associate Justice, a Judicial Registrar or one of two Costs Registrars). Except for timed attendances, including telephone attendances or attendances to instruct at court, costs aren’t assessed based on time spent. Rates allowed under the scale are deemed to be reasonable in all circumstances, providing certainty. Scale rates are periodically reviewed and indexed, so they keep pace with inflation. It is arguable that time billing protects and facilitates inefficient or incompetent practices, whereas a scale of costs allocates a set cost to each discrete item of work. The scale provides certainty, even where a practitioner hasn’t been as meticulous in recording time as they should have been. Scales of costs avoid any inflation in the amount of time spent and claimed. The various Victorian Scales of Costs reflect a focus on providing value to the client rather than the billable hour. Some Costs Court rulings are published, providing more transparency and consistency in decisions.   The scales provide just one rate for everyone, and don’t consider experience or expertise. The rigidity of the scale doesn’t allow a practice to use a wide range of fee earners with various levels of experience, in the same way that a costs agreement would. For example, the Supreme Court scale has just three basic rates (the highest rate being $393 an hour and the lowest $228 an hour). In complex or time-consuming matters, the scale can reduce a firm’s profitability. Efficient and ethical practitioners can be penalised by strict scale rates. When a costs agreement is based on high hourly rates (as might be the case, for say, a specialist lawyer with city offices), the gap between solicitor/client costs and party/party costs can be significant. Costs Court decisions are generally unavailable to non-parties.   NEW SOUTH WALES How are costs claims heard? In NSW, all costs assessment proceedings are paper based. How do you commence proceedings? Before applying for a party/party or a solicitor/client Application for Assessment of Costs, you will first need to serve a Bill of Costs on the Costs Respondent. The other party then has 21 days to file a Notice of Objections to the bill (30 days in the case of a client). A reply to these objections must be made within a further 21 days (although extensions are invariably granted if requested). Clients in practitioner/client disputes must file an Application for Assessment of Costs within 12 months of a bill being provided to them. Clients can also make a complaint to the Office of the Legal Services Commissioner (OLSC) in relation to a costs dispute under some circumstances pursuant to Division 1 of Part 5.2 of the Legal Profession Uniform Law 2014. Solicitors in solicitor/client disputes can only commence proceedings to recover costs claimed in a Bill of Costs 30 days after service of that document on a client, subject to provisions set out within section 194 of the Legal Profession Uniform Law 2014. If you file an Application for Assessment of Costs, the Assessor may fix a timetable if they haven’t received submissions or need additional information. What happens next? If the costs claimed are less than $100,000, the Costs Assessor has three months after a matter is referred to it to issue a Certificate of Determination with Reasons for Determination. This is subject to the Assessor receiving all information and, is subject to any timetable they have fixed. If the costs claimed are more than $100,000 they have six months to do this. The positives of NSW’s model The negatives of NSW’s model A paper-based system is often less costly as it doesn’t require oral submissions and court attendances. Parties receive a written record of all submissions and reasons for determination. Parties have time to formulate Submissions in Response.   The parties do not have an opportunity to clarify their position in person, in a mediation or taxation type setting. The waiting period of 3-6 months to receive a Costs Assessor’s Determination is a deterrent to seeking assessment of costs. This time frame extends if either party delays in providing submissions and responses. The Costs Assessors’ fees are payable by the party/parties ordered to pay costs of costs assessment. There are just over 50 Court Approved Costs Assessors in NSW with various levels of experience. This, coupled with a deregulated costs regime (with costs generally based on hourly rates rather than scale fees) leads to less predictable outcomes. Only parties to proceedings receive written decisions, again lending itself to less predictable outcomes. Unlike Victorian and Federal jurisdictions, there is no procedure or opportunity like a Taxing Registrar or a Mediator providing an estimate of the amount likely to be recovered if the matter proceeds to assessment. QUEENSLAND How are costs claims heard? As with NSW, in Queensland all costs assessment proceedings are paper based. How to commence a costs claim To claim costs on a standard or party/party basis, you will need to prepare a Costs Statement. You can find information about the procedure you must follow here. To claim costs on a solicitor/client basis, you must prepare an Itemised Bill of Costs. You can find more information about the procedure you must follow here. In a solicitor/client dispute, clients also have the avenue of making a complaint to the Legal Services Commission about its solicitors’ billing practices. What happens next?  The parties have the option of choosing a Costs Assessor, by agreement, from a panel of about 45 Court Approved Costs Assessors. Once the chosen Costs Assessor provides consent and once a Consent Order with respect to the Assessor to be appointed is filed, the Registrar can make appropriate orders and vacate the usual directions hearing date. If the parties can’t agree on a Costs Assessor, the judge or magistrate appoints an assessor at the directions hearing. The court-appointed Costs Assessor then undertakes an assessment of costs and provides a Certificate of Determination. The positives of Queensland’s model The negatives of Queensland’s model The parties have the liberty to agree on a Costs Assessor to perform the assessment by filing a request for a consent order with the registry and, if possible, be accompanied by the consent of the Costs Assessor. The registrar can make a consent order where appropriate and the directions hearing date will be vacated. Submissions in Response to any Notice of Objections is not ordinarily required.   There are minimal requirements to be appointed as a Costs Assessor (other than 5 years post-admission). Consequently, Queensland has numerous Court Appointed Costs Assessors of the approximately 45 appointed who have little experience or knowledge of costs. Like NSW, there is a lack of certainty and consistency in Queensland as to what will or will not be allowed on a Costs Assessment, such decisions varying from Costs Assessor to Costs Assessor. Due to the nature of the Costs Assessment process in Queensland indicates, elements of “forum shopping” are often seen, shopping for a Costs Assessor that is more likely to assess costs either more or less favourably. If the parties can’t agree on a Costs Assessor to perform the assessment, the judge or magistrate appoints an assessor at the directions hearing, adding to the costs of assessment. One authority holds that, if the parties can’t agree on a Costs Assessor, the cheapest Cost Assessor is appointed: Lessbrook Pty Ltd (in liq) v Whap; Stephen; Bowie; Kepa & Kepa [2014] QCA 63, at [34]. This isn’t necessarily a good thing because the cheapest isn’t the fastest or the most efficient. The formality of filing affidavits and nominating Costs Assessors also adds to the costs of assessment. The parties don’t have an opportunity to clarify their position in person, in a mediation or taxation-type setting. The party, or parties, ordered to pay the Costs Assessment will also be ordered to pay the Costs Assessor’s fees. Unlike the Victorian and federal jurisdictions, there is no opportunity to receive an early estimate of the costs likely to be recovered through a Taxing Registrar or Mediator. And finally… As you can see, each jurisdiction has its advantages and disadvantages. However, the one way to make sure you always capitalise on the strengths and avoid the pitfalls of the costs regime you’re working with, is to trust your costs to professionals like Blackstone. Lastly, check out the Australian Lawyers Alliance website for this and other interesting articles helping you to manage your practice.

BStone Admin | 24 Nov 2017
Blackstone Brief Volume 6

Queensland and Victoria In each jurisdiction that we practice in – NSW, Queensland and Victoria – party/party and solicitor/client costs are applied differently. Unless you are a costs lawyer immersed in costs law day in, day out, it can be confusing to know how costs will be calculated, or even to find the information you need. Two lawyers in our Sydney office, Romaine Abraham and Dipal Prasad, have created this short guide that explains everything you need to know about how costs are calculated in NSW, Queensland and Victoria. In this article, the first of three looking at the differences between these states, Dipal and Romaine focus on the subtle and not so subtle differences between each state when costs are assessed on either the party/party (“ordinary”) basis or assessed as between practitioners and clients. In the next two editions we will take a closer look at the different processes of costs assessment and the powers of costs assessors in each of the jurisdictions, with a specific focus on the advantages and disadvantages of each of the systems. New South Wales Time-costing In NSW, both party/party costs and solicitor/client costs are calculated based on hourly rates. This is usually done pursuant to the costs agreement between legal adviser and client. However, if the costs agreement is set aside or the hourly rate in that agreement is deemed unreasonable, fair and reasonable rates will apply. Party/party costs The test for assessing costs pursuant to a costs order one the party/party (or “ordinary”) basis is set out in s76 of the Legal Profession Uniform Law Application Act 2014 (NSW). In conducting an assessment of ordered costs, a costs assessor must determine what a fair and reasonable amount of costs is for the work concerned. To do this, they may examine the costs agreement. However, the costs agreement will not be conclusive when it comes to determining what is fair and reasonable in the circumstances. Solicitor/client costs The test for assessing whether solicitor/client costs are fair and reasonable is set out in s199 of the Legal Profession Uniform Law (NSW). The costs assessor must always determine: whether or not a valid costs agreement exists; whether legal costs are fair and reasonable; and to the extent they are not fair and reasonable, the amount of legal costs that are to be payable, if any. Section 172, in particular, specifies that costs are to be both proportionately and reasonably incurred, and proportionate and reasonable in their amount. The positives The negatives Time-costing allows hourly rates and lets a practitioner charge depending on their experience and skill. The fair and reasonable test is applied to all costs disputes in NSW, which makes it easier to convert a solicitor/client bill of costs to a party/party bill of costs than is the case in other jurisdictions. The gap between costs recoverable on a party/party basis and a solicitor/client basis is generally not as wide as in other jurisdictions. No uplift is allowed (except in solicitor/client disputes where the costs agreement specifically permits an uplift). There always needs to be a careful balance between brevity and sufficient information in the bill of costs to allow a client to understand and appreciate the fees charged (more so than in jurisdictions where a scale applies). It can be difficult to estimate other parties’ costs because different hourly rates often apply. This is not the case when a uniform scale of costs is used. Being able to recover full costs means always accurately and promptly recording all time, either during or soon after attendance. Queensland Standard costs (previously ‘party and party costs’) In Queensland, standard costs are dealt with in Chapter 17A of the Uniform Civil Procedure Rules 1999 (Qld). The Schedules to the Act also include: Scale of costs for the Supreme Court; Scale of costs for the District Court; Scale of costs for the Magistrates Courts. The test for assessing costs on a standard basis is set out in s702 of the Rules. It says: ‘When assessing costs on the standard basis, a costs assessor must allow all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being assessed.’ (emphasis added) Solicitor/client Costs For solicitor/client costs, the relevant provisions can be found in Part 3.4 of the Legal Profession Act 2007 (Qld) (LPA). In Queensland, costs can be claimed pursuant to any costs agreement with the client. If there is no costs agreement, then the relevant scale of costs will apply. If there is neither, then costs apply ‘according to the fair and reasonable value of the legal services provided’ (s319 LPA) (emphasis added). Section 341 of the LPA says that, when assessing what is fair and reasonable, the costs assessor must consider: (a) whether or not it was reasonable to carry out the work to which the legal costs relate; and, (b) whether or not the work was carried out in a reasonable way; and, (c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that s340 applies to any disputed costs. The positives The negatives Queensland allows for a care and consideration uplift (in percentage), which covers some attendances not recoverable pursuant to the prescribed scale of costs. The highest uplift that can be claimed is 30%, unless the case is extremely complex. Queensland’s ‘necessary and proper’ test is more stringent than the ‘reasonable’ or ‘fair and reasonable’ test that applies in other jurisdictions. That means only limited costs are recoverable on a standard basis, relative to other jurisdictions. Depending on the terms of the costs agreement, the gap between solicitor/client and party/party costs is usually as high as 60%, meaning only around 40% of solicitor/client costs are often recoverable on a standard basis. The relevant scale of costs has not been updated since 2013 and is well out of date. Victoria Scales of costs In Victoria, you will find each of the applicable scales on the Law Institute of Victoria website. Party/party costs Which scale applies for party/party costs depends on which court you are appearing in: For Supreme Court matters, you will find the scale of costs at Appendix A of the Supreme Court (General Civil Procedure) Rules 2015. For the County Court, costs are set out in the County Court (Chapter 1 Costs Amendment) Rules2014. From 6 October 2014, they are assessed at 80 per cent of the Supreme Court scale. For Magistrates’ Court matters, you will find the scale of costs at Appendix A of the Magistrates’ Court General Civil Procedure Rules 2010. For Victorian and Civil Administrative Tribunal matters, costs are generally awarded on the County Court scale. Solicitor/client costs In Victoria, solicitor/client costs are usually claimed pursuant to the costs agreement a solicitor has with their client. The most common methods of charging legal work include: According to time: charging the actual time spent on a particular task and ultimately the matter. Rates will vary according to the size and location of the practice, and the experience of the practitioner providing the service. By reference to scale:  to the relevant scale of costs or Practitioner Remuneration Order. By fixed or flat fee: charging an agreed fee for the whole of the matter, for a stage or for a task. By conditional fee: where all or part of the fee is conditional on success or a specific outcome being achieved. The rate for charging on conditional agreements can be calculated in accordance with any of the three methods above. The positives The negatives Reliance on scale provides a uniform approach to claiming costs. With the exception of timed attendances, including telephone attendances or attendances to instruct at court, for example, costs are not assessed based on time spent. Rates allowed under the scale are deemed to be reasonable, providing certainty. Scale rates are periodically reviewed and indexed, so they keep pace with inflation. It is arguable that time-billing protects and facilitates inefficient or incompetent practices, whereas a scale of costs allocates a set cost to each discrete item of work. The scale provides certainty, even where a practitioner has not been as meticulous in recording time as they should have been. Scales of costs avoid any inflation in the amount of time spent and claimed. The various Victorian Scales of Costs reflect a focus on providing value to the client rather than the billable hour. Efficient and ethical practitioners can be rewarded by strictly applied scale rates. The scales provide just one rate for all legal practitioners, and do not take into account experience or expertise. The rigidity of the scale does not allow a practice to use a wide range of fee-earners with various levels of experience, in the same way that a costs agreement would. For example, the Supreme Court scale has just three basic rates (the highest rate being $393 and the lowest $228). In complex or time-consuming matters, the scale can reduce a firm’s profitability. When a costs agreement is based on high hourly rates (as might be the case for, say, a specialist lawyer with city offices), the gap between solicitor/client costs and party/party costs can be significant. And finally… As you can see, each jurisdiction has its advantages and disadvantages. However, the one way to make sure you always capitalise on the strengths and avoid the pitfalls of the costs regime you’re working with, is to trust your costs to professionals like Blackstone. Lastly, check out the Australian Lawyers Alliance website for this and other interesting articles helping you to manage your practice.

BStone Admin | 27 Oct 2017
The indemnity principle, unmasked

ases. In this month’s edition Chris Grisenti, an associate solicitor in our Melbourne office, and another solicitor also based in Melbourne, Jasmine Beteramia, take a look at the indemnity principle. This principle restricts a successful litigant to claiming only the costs their solicitor will charge. But what does that mean in practice? And, more importantly, how does the principle impact on the way you should be charging? And a little reminder before reading on… The lead-up to Christmas is always a busy time for Blackstone. If you need your file costed before you return to the office in the New Year, be sure to schedule the work with us as soon as you can. The indemnity principle, sometimes known as the indemnity rule, states that a successful litigant who obtains a cost order cannot recover more than their own solicitor will charge. Justices Redlich and Mandie of the Victorian Court of Appeal set this out in Shaw v Yarranova Pty Ltd [2011] VSCA 55 when their Honours stated: “an order for costs…aims to provide the successful party with some level of indemnity for the legal costs the successful party would not have incurred…[S]uch an order does not entitle the successful litigant to recover more than he or she has paid or is liable to pay.” This has very real implications for the ability of legal practitioners to recover costs. Following the changes to the Victorian Supreme Court and County Court in 2013 and 2014, it is increasingly common for the costs calculated under these scales to be higher than the amount charged by legal advisers. So what exactly can litigants claim? And what does it mean for you as a practising solicitor? Two recent cases shed light on the indemnity principle. Kilkenny Walsh Pty Ltd v Strasburger Enterprises Between 2011 and 2014, this dispute ran in the Supreme Court of Victoria. Prior to the trial, the applicant, Kilkenny Walsh, accepted a one million dollar offer of compromise. It then prepared a bill of costs totalling $2,717,268.22. The respondent, Strassburger Enterprises, alleged the claimed costs exceeded Kilkenny Walsh’s liability to pay costs and offended the indemnity principle established in Shaw. It asked the court to compel Kilkenny Walsh to produce several documents, including the retainer, costs agreement, any third party funding arrangements and all bills and tax invoices. It argued that it needed these to ascertain whether there was a liability. Meanwhile, Kilkenny Walsh opposed the application, claiming it was a fishing expedition. Judicial Registrar Gourlay considered the principles in Shaw and, another case, Kuek v Deflan Pty Ltd [2012] VSC 571. This decision had found that, when assessing whether a party was seeking to recover more than they were entitled to, a court ought to have regard to any evidence presented on the taxation. With this in mind, the Judicial Registrar ruled that retainer letters were relevant to establishing the extent Kilkenny Walsh’s liability to its lawyers, “and thus bore on the applicant’s ultimate contention as to the breach of the indemnity principle.”  Gourlay JR addressed each document individually and decided: Retainer letters/Costs agreements. These were relevant and should be produced. Third party funding. A third party arrangement won’t extinguish a party’s liability to pay costs to their solicitor. If there was no evidence of a third party arrangement, asking for their production is a fishing expedition and no order should be made. Disbursement invoices. Counsel backsheets, fee memoranda, disbursement invoices and expert evidence fees provided details of charges claimed in the bill and offered insights into the work experts and counsel have undertaken. This meant they should be produced. Implications for Practitioners If, in a costs matter, the other side requests you to provide copies of your invoices, you won’t usually be compelled to produce them. However, you may need to produce your costs agreements and disclosure statements. This may have ramifications in the light of the next decision we consider. Pieter Mourik v Roland Von Marburg [2016] VSC 601 This matter came before Wood JA of the Costs Court after the Supreme Court made a costs order in Mourik’s favour. Mourik was the second defendant in those proceedings but became the applicant here. Mourik sought to have these costs taxed in the Costs Court while the substantive proceeding remained on foot. Orders were made for costs to be paid forthwith, considering Rule 63.20.1. The respondent, Von Marburg, raised a preliminary issue as to whether Mourik had a right to recover legal costs. He believed Mourik’s lawyers, Minter Ellison, were acting on a pro bono basis and asked that his costs agreements and disclosure statements be produced. While Mourik objected to producing these documents, he eventually acquiesced prior to the preliminary hearing, filing four costs agreements: one between Mourik and Minter Ellison, one between Dr Collins QC and Minter Ellison, and two between Ms Hickey of Counsel and Minter Ellison. Minter Ellison Costs Agreement Wood JA considered this agreement in some detail. The agreement stated: “We have agreed that we will not charge you for the work except where specified below…The matters we will invoice you for are expenses and disbursements in connection with the work.” It did not provide any rates for lawyers working on the file. This led Mourik to argue that, where a contract was silent as to price, a reasonable price can be charged. The agreement also addressed the possibility that a costs order might arise, stating that: “Where you are the beneficiary of such an order, we may give you an invoice for our charges, including our professional fees, to an amount no greater than the amount recovered from another party”. Wood JA considered how this paragraph applied, particularly in light of the decision in Mainieri v Cirillo (2014) VSCA 227. His Honour found that: ”If the indemnity principle is considered at the time of taxation…and the liability to the practitioner in an Agreement is triggered by a favourable costs order then the liability crystallises before the taxation. Where the liability is triggered by an amount recovered, there is no liability at the time of the taxation” Wood JA found that Mourik had no liability to pay costs at the time of taxation, even if Minter Ellison was able to charge Mourik. This was because any liability only arose upon recovery from Von Marburg. Wood JA called this a “circular conundrum”, as fees could only be taxed once there was liability but liability only arose upon recovery. Counsel’s Agreements Wood JA considered counsel’s costs agreements only briefly. Dr Collins QC’s agreement stated that the basis for charging was a costs order or case settlement where legal costs were included. Therefore, the liability for fees was triggered prior to a taxation, and so these costs were recoverable. Ms Hickey’s initial agreement stated that the basis for charging was both: An order for costs in favour of the Applicant, and, Limited to the extent that the party against whom the order for costs is made in fact pays the costs. This passage would trigger the same circular conundrum Minter Ellison had, as liability was only triggered by a recovery. However, Ms Hickey provided a second agreement which was expressed as retrospective, and contained a similar clause as Dr Collins QC. As a result, His Honour found that there was liability to pay Counsel’s fees, and these fees could be taxed by the Costs Court. What this decision means for you  While an opposing party can’t review your invoices or timesheets before a taxation has concluded, in party/party matters they can call for and review both solicitors’ and counsel’s costs agreements and disclosure statements. And, if you act on a pro bono or conditional basis, you should always ensure you do not make any liability for legal costs contingent on recovery of party/party costs from the unsuccessful litigant. If you do, any recovery of costs will be a breach of the indemnity principle, and you won’t be entitled to recover any party/party costs, even if there is a court order that these to be paid.

BStone Admin | 06 Oct 2017
Blackstone Brief – Volume 4

our terms in your own writing. When your firm takes over a matter from another firm, you should never start work without first signing a new costs agreement. One of the most common disclosure problems we encounter happens when a client leaves one firm and takes their matter to a new firm. Often the new firm will rely solely on the previous firm’s costs agreement and costs disclosure.. That may be understandable, given that lawyers always need to balance their fiduciary duties to their clients with the financial imperative which comes from the need to turn their labour into profit. Asking a client to agree to an extensive, detailed and, often, overwhelming disclosure at the very moment they’re considering the merits of engaging you, seems like a recipe for scaring them away.. However, relying on an existing costs agreement with a former firm exposes your firm to a costly costs assessment and even exposes you, as the responsible practitioner, to a risk of professional disciplinary proceedings as a recent case makes clear. One of our costs lawyers based in Blackstone’s Sydney office, Kate Chan, takes a closer look.. The costs agreement In Council of the Law Society of the ACT v Legal Practitioner 12 (Occupational Discipline) [2017] ACAT 52, a Canberra-based legal practice took over a client’s motor accident claim from another firm. As part of the negotiation process to take on the client’s file, the solicitor wrote to the client and told him that they would continue to prosecute his claim on the same basis as his previous legal advisers. This included advising him that, “your matter will be handled on a no-win no-fee basis and your liability to pay our legal costs will only arise if your matter is successful”. The solicitor’s covering letter also stated: “We confirm that we will continue to prosecute your matters on the same basis as [the outgoing firm]. Enclosed is a copy of the costs agreement which you signed with [the outgoing firm] on 9 February 2009. We hereby adopt the terms and conditions of the above retainer.” As is the case in many State and Territories, charging on a contingency basis was expressly forbidden by s 285 (1) of the Legal Profession Act 2006 (ACT) (the Act). The Client’s Complaint In June 2011, the new solicitors settled all of the client’s claims for him, on the basis the payment was inclusive of legal costs basis or on a costs agreed basis. Following this, the settlement funds were deposited into the firm’s trust account. From this money, the firm paid the previous solicitors’ legal costs after that firm reduced their claim for costs. The new firm also paid their own legal costs out of the trust account. The client subsequently filed a complaint, which was referred to the Council of the Law Society of the Australian Capital Territory. He claimed he was charged more than he agreed to pay. The Law Society then also brought disciplinary proceedings against the solicitor in charge of the matter under s 419 of the Act. In doing so, it raised five separate misconduct allegations. These related to entering into a contingency fee agreement, disbursing money including trust money in breach of the client’s direction, and misappropriating funds from their trust account. The matter was heard in the ACT Civil and Administrative Tribunal on 2 March 2017. Contingency Fees At the hearing, the Law Society argued that the practitioner had illegally entered into a costs agreement with the client on a contingency basis. In response the solicitor, somewhat paradoxically, argued that its agreement hadn’t complied with s 283(3)(c) of the Act because it was not in writing and the basis of charging was conditional. A two-member panel agreed with this submission and dismissed the charge regarding the contingency fee arrangement, describing it as “not easy to interpret”. It ultimately found that the Law Society’s evidence was not capable of being proven. A hearing date is yet to be set for the charges regarding disbursing trust money in breach of the client’s direction and misappropriating money from the trust account. Both relate to s 223 of the Act. Implications for Law Firms Despite this finding, the decision has three main implications for law firms who try to incorporate a previous firm’s costs agreement into their new costs agreement. 1. When a conditional costs agreement isn’t in writing, no agreement exists First, it’s clear that an undertaking to accept all terms of a former firm’s costs agreement won’t satisfy the requirement that conditional costs agreements be made in writing, even where the undertaking is given in writing. Instead, a court is likely to find that no written agreement exists. This means the terms of the outgoing firm’s agreement won’t be enforceable and, in the case of NSW motor vehicle accident and workers personal injury compensation claims, a firm will be forced to revert to regulated fees. This will usually be significantly lower than those charged by most firms on an hourly basis. 2. Costs agreements, conditional or not, should be evidenced in writing There are also, arguably, broader implications that concern the evidencing of costs agreements generally. It is entirely conceivable that a disgruntled client could assert that their agreement with the new firm was never evidenced in writing. This could happen regardless of whether the basis of charging is conditional or not. Under s 174(3) of the Legal Profession Uniform Law (NSW), s 308 of the Legal Profession Act 2007 (QLD) and s 174 of the Legal Profession Uniform Law Application Act 2014 (VIC), legal practitioners must disclose details of its costs before, or as soon as practicable, about how much their services are likely to cost and the basis of calculating the costs. They must disclose this in writing and present the information in a concise and clear format. If there is likely to be a significant increase in the estimated cost originally quoted, the client must be notified as soon as reasonably possible after the law practice becomes aware of the change, and notified in writing. Further, legal practitioners are obliged take all reasonable steps to ensure they are reasonably satisfied that the client understands the costs disclosure given, particularly relevant when clients are from culturally and linguistically diverse backgrounds. Adopting the same terms as the client’s former solicitors can be risky Lastly, and most importantly, when a practitioner seeks to subsume the terms of an outgoing firm’s costs agreement, there is very real risk. This includes reputational risk, financial risk and also the risk that a governing law society will prosecute them for seeking to contract on an illegal basis. Want more? If you’d like to discuss how this decision applies to your costs agreements, get in touch.

BStone Admin | 27 Aug 2017
Blackstone Brief – Volume 3

at the outcome of a recent Federal Court decision regarding indemnity costs and Calderbank offers. Get in touch if you’d like help with your costs claim. It’s rare for a party to be awarded costs on an indemnity basis. However, one time they will be is where the other party “wilfully disregards” facts.  A recent Federal Court decision explored when this exception applied, as well as how long you need to give someone to consider a Calderbank letter before you can rely on it in a claim for indemnity costs. And the Federal Court had some interesting things to say about both. The general rule about indemnity costs Generally, costs are awarded on a party/party basis, except in special circumstances that have been laid out in case law.  Whether indemnity costs are justified will depend upon the facts and circumstances of each case. In the recent decision, MCG Group Pty Ltd v Ftrus Pty Ltd (formerly Fortrus Pty Ltd) [2017] FCA 359 (MCG Group), Justice Greenwood reasserted this rule: “While the circumstances identified by the Court [in InterTAN Inc v DSE (Holdings) Pty LtdFCAFC 54 at [11]] may serve as a guide to the exercise of the discretion, the question is always whether the particular facts and circumstances of the case at hand justify the making of an order for costs other than on a party and party basis.” One exception – wilful disregard of facts Like most rules, there are exceptions. These exceptions allow the court to award indemnity costs, for example, where an application has no chance of success or where the justice of the case warrants it. In MCG Group, Justice Greenwood considered the exception identified in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202 that says indemnity costs will be justified where someone commences an action in wilful disregard of known facts or contrary to well established law. In the main judgment, the court had made orders in favour of the Applicant. In its submissions on costs, the Applicant argued the Respondents should pay costs on an indemnity basis, because of their’ “wilful disregard of the known facts”. As evidence of this, the Applicant relied on the Court’s finding that the Second Respondent, Mr Paul McDonald, answered a number of questions put to him on trial in an obfuscated manner, particularly questions on whether he had made an agreement with his brother in 2013 – one of the main issues in the case. “Obfuscation” not enough to warrant indemnity costs However, Justice Greenwood held that this “obfuscation” was not alone sufficient to warrant an indemnity costs order, saying: “Although Mr Paul McDonald clearly engaged in obfuscation in answering a number of questions in the course of the proceedings I am not satisfied that, by itself, this demonstrates that the respondents engaged in wilful disregard of the primary facts in the course of the trial. I am therefore not satisfied that special circumstances, required to justify an order of indemnity costs for the whole proceeding, subsisted in this case.” The rule to remember here—if you want to seek indemnity costs on the basis of the other party’s wilful disregard of facts, make sure you have a solid and extensive case for this claim. It’s not usually enough to rely on the testimony of one witness. Calderbank offer – what is enough time? Another time courts can award indemnity costs is where a party rejects a reasonable offer of compromise or Calderbank offer. In the MCG Group case, the Applicant pleaded that if indemnity costs weren’t awarded for the whole proceeding, they should at least be awarded from 30 November 2015. This is when it had made a Calderbank offer to the Respondents for $750,000 to settle the dispute. The final judgment exceeded this amount by about $135,000. The court accepted that the Respondents would have been better off by $73,022.00 had they accepted the offer. However, it noted that the offer was made on 30 November 2015 and was only open until 10am, the next day, on 1 December 2015. The court also noted that the Respondents would have been better off financially if they’d accepted the offer. But they had acted reasonably in rejecting it because the short window in which they had to make a decision gave them no reasonable opportunity to assess the costs. The rule to remember here—time limits are important when making offers to settle. When you make a Calderbank offer, give the other party some time to consider their position and assess the costs of the case. Essentially, make sure you give someone enough time to consider your offer. Keeping an offer open for just one day is simply not enough. Want more? Get in touch with us for advice on when you can claim for indemnity costs. We can also help you know where you stand when making or receiving  Calderbank offers