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Is your file storage facility a ticking time bomb?

Charles Galayini | Monday, May 07, 2018
Is your file storage facility a ticking time bomb?

Law Cover recently produced an informative Podcast in which Jenny McMillan of Law Cover and Jacqueline Highfield of Clarence Professional Group discussed the risks and difficulties lawyers face with costs disputes.

The Podcast focussed on the challenges for firms managing current matters to prevent Costs Disputes, all of which were accurate strategies and recommendations. But the bigger picture is that lawyers are vulnerable to attack from previous matters which may have been successfully concluded for several years. The inconvenience, disruption and hassle of being required to prepare an itemised bill or defend a costs assessment outside of the prescribed timeframes is a serious and real risk for law firms. In effect there is no real time limit in which a client has to demand a Bill of Costs and thereafter seek a Costs Assessment.

The Legal Profession Act (2004) and subsequent Legal Profession Uniform Law (NSW) 2015 provide legislative time limits for requesting an itemised bill and seeking a Costs Assessment. However, the legislative framework needs to be considered in conjunction with the associated case law which provides a clear discretion to the interpretation of relevant sections of the Acts.

Legal Profession Act 2004

s.350 Provides for Applications by the client or third-party payer for Costs Assessments.

On the face of it s.350(4) provides that clients must apply for a Costs Assessment within 12months of the bill being given or request for payment is made.However, there are a number of legislative provisions which make this 12-month period irrelevant.

s.350(5) states; However, an application that is made out of time, otherwise than by:

(a)a sophisticated client, or

(b)a third party payer who would be a sophisticated client if the third party payer were a client of the Law Practice concerned,

May be dealt with by the Costs Assessor if the Supreme Court, on application by the Costs Assessor of the client of third party payer who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that is just and fair for the application for assessment to be dealt with after the 12 month period.”

s.728(1) states- “On the application of a client of a Law Practice, the Supreme Court may order the Law Practice:

(a)to give the client a Bill of Costs in respect of any legal services provided by the Law Practice, and

(b)to give the client, on such conditions as the Supreme Court may determine, such of the client’s documents as are held by the Law Practice in relation to those services.

(2) Subsection (1) does not affect the provisions of Division 11 of Part 3.2 with respect to the assessment of costs. “

It is clear that the provisions referred to have the effect of making the 12-month period a moot point.

Legal Profession Uniform Law (NSW) 2015

s.187(2) and s.193(3) seem to suggest that a client has only 30 days after the legal costs become payable to request an Itemised Bill and must make an application for assessment within 12 months of receiving the Bill of Costs.However, there are a number of legislative provisions which make the 30 day period and the 12 month period irrelevant.

s.198(4) states – “However, an application that is made out of time may be dealt with by the Costs Assessor if the designated tribunal, on application by the Costs Assessor or the client or third party payer who made the application for assessment, determines, after having regard to the delay and the reasons for the delay, that it is just and fair for the application for assessment to be dealt with after the 12month period.”

s.284(2) states in relation to referral of matters for Costs Assessment specifically to the Legal Services Commission – “Any such application may be made outside any applicable time limit for making applications for Costs Assessments.”

s.472(1) in relation to Supreme Court delivering up documents states – “On the application of a client of a Law Practice, the Supreme Court may order the Law Practice –

(a)to give the client a bill of cost in respect of any legal services provided by the Law Practice, and

(b)to give to the client, on any conditions that the Supreme Court may determine, any of the client’s documents that are held by the Law Practice in relation to those services.

(2) Subsection (1) does not affect the provisions of Division 7 of Part 4.3 with respect to the assessment od costs.”

Even though the 2004 Act has been replaced, the transitional provision in Schedule 4, Clause 4 of the LPUL, keep the time limits of the 2004 Act active.

It is therefore clear that whilst there are time limits that seem to work in favour of the Law Practice, in all real circumstances these problematic time limits may not exist.

The following cases provide some examples where the above sections have been argued and clearly demonstrate that the prescribed ‘time limits’ are open to interpretation.

1. Le -V- Brydens Lawyers Pty Ltd [2017] NSWSC 180

The Plaintiff, Le, was seriously injured at work in 2005, instructed Brydens in 2006 and they commenced proceedings in the District Court in 2007. The matter was heard by Levy DCJ who gave judgement in favour of the Plaintiff. The Defendants appealed but ultimately the matter settled for $650,000 inclusive of costs in June 2013.

In October 2014 a bill in assessable form was requested. The solicitor refused as the 12-month time period had expired.

Her honour, Schmidt J, found in favour of the Plaintiff-client concluding that there was no time limit for refusing an itemised bill imposed by S.332A of the LPA 2004 and ordered a bill of costs be provided.

2. Lukic -V- De Luca – Leonard [2017] NSWSC 814  

The solicitor, De Luca – Leonard, received instructions from Lukic in May 2010 to run a worker’s compensation case resulting from alleged bullying and a costs agreement was signed on 14th March 2011. The client Lukic was assessed at 60% WPI entitling her to work injury damages. At mediation on 2 April 2014 the matter was successfully settled with the client receiving $300,000 and the solicitor rendered a lump sum bill of $74,000 for costs and disbursements on 22nd April 2014.

In 2016, the client saw new solicitors, alleged an overpayment of $55,025, and demanded the recovery and an itemised bill of costs. The solicitor did not provide an itemised bill as the 12-month period had expired.

The Court considered the defence raised by the solicitor to have been a “hopeless case”, (page 6 of the judgement) and his Honour went on further to say, “I am not prepared to agree with Counsel’s submission that Ms De Luca-Leonard’s defence of the claim was conducted in good faith.” In short, the court considered that the solicitor had no prospect of success.

3. Bruce v Magee t/as Armstrong Legal [2017] NSWSC 1687

The substantive question of costs was heard on 6th April 2017 where her Honour, McCallum J, ordered that the Defendant solicitor was required to pay two-thirds of the client Plaintiff’s costs. Before the Defendant solicitor was required the give evidence the matter was settled by the solicitor capitulating and it brings to question why there is a time period for costs disputes at all.

The reasoning by McCallum J is concerning. Her Honour indicated that additional costs could have been prevented if the solicitor had consented to the assessment of the bills from the outset. Essentially, this is saying that solicitors should disregard the time period for assessment and just get on with having the costs assessed.

4. Hanna v Uther Webster & Evans [2018] NSWSC 465

The Plaintiff, Hanna was a third-party payer, having paid legal costs for his son who was charged with murder. The Plaintiff sought an extension of time to obtain a Costs Assessment 3½ years out of time.

Rothman J held the Plaintiff was not an unsophisticated client pursuant to s.350(5)(d) LPA 2004 and that the Plaintiff bears the onus of proof of establishing that it is just and fair that he should be granted dispensation under s.350 LPA 2004.

His Honour considered the relevant test pursuant to be whether it is “just and fair” for the application to be dealt with having regard to the delay and the reasons for the delay “see Harvey v Goodman Law Pty Ltd 2011 NSWSC 34, 29th April 2011”.

His Honour did not grant the extension in this matter, noting the following;

  • (a)there is no suggestion, even in the application to the Costs Assessor, that the memorandum of fees and costs, rendered were unfair or unreasonable.”
  • (b)“…And the lack of credibility of the Plaintiff on these issues…”

Victorian Legal Services Commissioner – 19th December 2016 (Commissioner Determination, inadequate Costs Disclosure) http://lsbc.vic.gov.au/documents/Commissioner_Determination_1_of_19_12_2016_Redacted.pdf

The Victorian Legal Services Commissioner dealt with this matter were the issue was whether the lawyer had failed to provide an Itemised Bill.

The claimants request for an Itemised Bill was made outside the 30-day time limit prescribed by s.187(2) LPUL (2014).As such the Law Practice was not obliged to provide the claimant with the Itemised Bill.

The commissioner stated, “At my request, an Itemised Bill has since been provided to the complainant by the Respondent’s lawyer.”The fact is of course, that pursuant to s.284 UPUL 2014, if the commissioner requests that the bill be provided, it must be provided.

Conclusion

The legislative provisions and the case law suggest that whilst time limits exist in relation to Bills of Costs and Costs Assessments, they are only fuel for argument. You need to ask yourself whether your file storage facility may be a haven for time bombs waiting to explode and play havoc with your Law Practice.

Regardless of whether an application out of time is granted or denied, the arguments will eventually need to be ventilated in the Supreme Court at great costs, time and emotional turmoil.

The Costs Cover policy, which provides an unlimited retro-cover option, is a vital risk prevention strategy to any law practice. Costs Cover gives solicitors and barristers the ability to outsource the defence and cost of responding to a Costs Assessments, even one that is out of time, allowing an independent panel member to represent you whilst you continue to focus on managing your legal practice.And if the event of an adverse determination, your Costs Cover policy will respond to ease the financial burden of repaying those professional fess already received.

 


Costs Cover