The laws of costs: 2020 year in review

Readers who follow this area of the law will be aware that in 2019 the High Court delivered judgment in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; (2019) 372 ALR 555 (‘Bell Lawyers‘). The Court held that the ‘Chorley Exception’ –  the rule that where a legal practitioner litigant acts on their own behalf and receives a costs order, they can recover the costs for so acting – is not part of the law of Australia. A detailed examination of developments since Bell Lawyers is beyond the scope of this article. However, for present purposes, some of the most noteable decisions that arose in 2020 with self-represented solicitor litigants, can be summarised as follows:

• United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15 – where costs were not recoverable when employed solicitors (rather than the partners in the traditional law firm partnership), did the work;
• D A Starke Pty Ltd v Yard & Anor (No 2) [2020] SASC 81 – where the sole director/secretary of an incorporated legal practice (‘ILP’) was refused recovery of professional fees under a costs order;
• Guneser v Aitken Partners (Cross appeal on costs) [2020] VSC 329 – where a multiple director/shareholder ILP as solicitor on record was refused recovery of fees under a costs order;
• Although not a 2020 decision, Coshott v Spencer & Ors; Coshott v Spencer & Ors [2019] HCATrans 183 – where the solicitor retaining an ILP agreeing to pay costs, was allowed a recovery under a costs order;
• Coshott v Commonwealth Bank of Australia [2020] NSWCA 279 – where the Court of Appeal refused leave to appeal from a decision where the bank undertook not to recover professional costs incurred by in-house lawyers and staff, and the primary judge thought the issue as to entitlement to recover was hypothetical.

Can a lawyer recover fees incurred while in a position of conflict of interest?

In Atanaskovic Hartnell v Birketu Pty Ltd re Supervisory Jurisdiction [2020] NSWSC 573 Hammerschlag J considered whether a law firm could recover fees for work done in circumstances where:

1. the firm was in a position of actual and potential conflict of interest with its client (at [75(1)]); and
2. the work that it did under the retainer included work that was done for its own benefit where its interests were adverse or potentially adverse to those of its clients (at [75(2)]); and
3. it had given an undertaking that it would not charge the client for work done in defending it against the actions of a fraudulent employee on the basis that ‘this whole matter was created as a result of one of my staff members’ (at [24]).

His Honour determined that the fees incurred were mostly unrecoverable (with a relatively minor exception for a category of work which was not infected by the conflict of interest).

His Honour observed that to permit the law firm to recover more would:

1. give efficacy to the retainer which it was not open to the law firm, acting ethically, to accept in the face of the clear and profound conflict between its own interests and the duties which it owed to the client;
2. require the client to pay the law firm for work which the firm did in its own interests and for its own benefit, or contrary to the interests of the client (or both);
3. allow the firm, dishonourably, to renege on the undertaking which it gave to the client in a professional capacity.

The judgment is an important one in relation to a solicitor’s duty and responsibility when facing a situation in which there is a potential or actual conflict between his or her own interests and the duties owed to the client. Whilst there is, at least in some situations, the possibility of obtaining the client’s informed consent, the burden is a heavy one for the solicitor to discharge (at [85]).

His Honour also examined the scope of the Court’s supervisory jurisdiction over solicitors. The expression of this jurisdiction in relation to its effect on costs does not arise frequently given that most costs disputes are dealt with through the costs assessment system, but in this case, it concerned an undertaking not to charge particular costs. In this case, the law firm sued the client, pursuant to a written costs agreement. An earlier decision of the Court in the same proceedings, Atanaskovic Hartnell v Birketu Pty Ltd [2019] NSWSC 1006 concerned the question of the Court’s approach to determining whether costs charged were fair and reasonable. This case is an important precedent for instances where a law firm seeks to recover fees but cannot apply for costs assessment, such as when the client is a ‘government or commercial client’ under the Legal Profession Uniform Law (‘LPUL’). In such a case the Court does not necessarily follow or try to emulate what a costs assessor would do (at [47]–[56]). If the proceedings are in the Supreme Court, the Court’s supervisory jurisdiction is well understood. However, the District and Local Courts do not have the same supervisory jurisdiction. They can, however, hear claims for breach of contract, such as where the proceedings are pleaded in contract and a term that the law firm will charge fair and reasonable fees is express or can be implied. These considerations will need to be considered in choosing the right Court in which to commence.

Does a barrister have an equitable lien in respect of fees?

The rules in relation to whether a solicitor can claim a so-called equitable lien over funds to secure the payment of fees are relatively well settled. The authors have considered this issue previously (See: LSJ p86-87, July 2018 and LSJ p80-81, Aug 2018).

In a recent decision delivered by the Queensland Supreme Court in Williamson & Williamson v Pay [2020] QSC 324 the question arose as to whether a barrister can claim an equitable lien. There are previous decisions which accept that, in some cases, a barrister is entitled to claim an equitable lien: Simpson v Rowe [2011] VSC 149 (direct brief barrister); Trkulja v Efron [2014] VSCA 76 at [100] (obiter re barrister); Hudson v Sigalla (No 3) [2016] FCCA 2140 (counsel and solicitors as separate applicants); Glasgow v ELS Law Ltd & Ors [2018] 1 WLR 1564 at 1575.

Conceptually there are some difficulties with this approach, and this is particularly so before 1994 when a barrister had no right to sue for his or her fees and so could not assert a debt for fees. However, if it is accepted that an equitable lien is reliant not on a contract for fees but on a right to assert fees in relation to the work done which helped to bring a fund into existence, there is no reason to deny the existence of the so-called equitable lien to a barrister.

A possessory lien raises different issues and at least where the traditional relationship of instructing solicitor and barrister is involved, it will usually be the case that counsel comes into possession of a document or thing through the agency of the solicitor rather than directly from the client.

What is the nature of an appeal from a decision of a review panel under the Legal Profession Uniform Law?

In answer to this question it is useful to turn to the Court of Appeal’s recent decision in Gilmore Finance Pty Ltd v Aesthete No 3 Pty Ltd [2020] NSWCA 114, where the appeal appeared at least on one view to have been conducted as a hearing de novo. That decision was the subject of an application for judicial review in the Court of Appeal but, as it was filed out of time, an extension was required. The Court refused to extend time and dismissed the Amended Summons. The Court observed that ‘the sole ground for the claim to relief by way of judicial review is that the primary judge committed a jurisdictional error by “failing to conduct an appeal by way of rehearing according to law”’ (at [5]).

Meagher JA, with whom Macfarlan and White JJA agreed, considered the difference between an appeal by way of rehearing, a hearing de novo, and a strict appeal. His Honour considered that the approach taken, focussing on the parties’ submissions by reference to further evidence, was arguably not the proper approach to such an appeal.

Meagher JA agreed with the applicant’s submissions that ‘the primary judge does not engage at all with any particular findings of the Review Panel, or assessor’, and went on to say, ‘[i]n considering the application for an extension of time it may therefore be accepted that the applicant’s substantive claim for judicial review has arguable prospects of success’ (at [16]). Practitioners should carefully consider the observations made in the judgment and, the authors suggest, proceed on the basis that the appeal is by way of rehearing in the conventional sense, rather than by way of hearing de novo.

The Court also remarked that the review panel did not have the benefit of evidence from the solicitor (at [13] and [14]). However, practitioners should be aware that under LPUL a review panel has power to accept sworn evidence and, if necessary, to hold a hearing (for example, where it is necessary to properly undertake the fact finding task such as when there are contested facts on crucial issues). Furthermore, parties to a costs assessment, and review, are to some extent bound by the way they conduct their cases in those forums (see: eInduct Systems PtyLtd v 3D Safety Services Pty Ltd [2015] NSWCA 284 at [14]). Accordingly, practitioners should carefully consider whether their application for assessment or review, or the defence of those processes, ought to be supported by sworn evidence and should not assume that it will be open to them to adduce any form of fresh evidence on appeal. Typically, sworn evidence is given by way of statutory declaration in costs assessment as the proceedings are not Court proceedings.

Michelle Castle is a barrister at 13th Floor, St James Hall Chambers. Andrew Bailey is a barrister at Frederick Jordan Chambers.