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Precedent (Australian Lawyers Alliance) |
Disclosure and Consequences of Non-Compliance
By Phillipa Alexander
The Legal Services Council has amended the Legal Profession Uniform General Rules 2015 (NSW) by the inclusion of a new Rule 72A.[1] In effect, the Rule provides that s178(1) and (2) of the Legal Profession Uniform Law (NSW) (the Uniform Law) does not apply in circumstances where the relevant authority, a costs assessor, a court or a tribunal is satisfied that:
(a) the law practice took reasonable steps to comply with the disclosure obligations of Part 4.3 of the Uniform Law before becoming aware of the contravention; and
(b) the law practice, no later than 14 days after the date on which it became aware of the contravention, rectified the contravention, as far as practicable, by providing the client with the necessary information required to be disclosed under Division 3 of Part 4.3 of the Uniform Law (including, where relevant, an estimate or revised estimate of the costs); and
(c) the contravention was not substantial and it would not be reasonable to expect that the client would have made a different decision in any relevant respect.
The Rule is timely and provides a way in which the significant consequences of non-disclosure prescribed by s178 of the Uniform Law, such as the costs agreement being void,[2] may not be invoked in all cases, particularly where there has been minor technical non-compliance with disclosure which has not affected the client's decision to continue to instruct the law practice. The Rule also allows for a period of 14 days from the date on which the law practice becomes aware that an estimate has been exceeded, to update the estimate.
The requirement for the client to establish that a different decision would have been made had the non-disclosure not occurred was recently considered in the decision of Burrell Solicitors Pty Ltd & Anor v Reavill Farm Pty Ltd & Ors.[3] The solicitors were retained by the clients to act on their behalf in relation to two proceedings in the Land and Environment Court. The costs were partly paid in the sum of $358,247.34 and, on assessment, the costs assessor determined that further amounts of $185,400.86 for counsel's fees and $345,832.37 for solicitors' fees were payable by the clients. As a consequence of the non-disclosure, these amounts included a reduction of 5 per cent of the costs pursuant to s317(4) Legal Profession Act 2004 (NSW) (LPA) and the setting aside of the solicitors' costs agreement. An appeal from the determination of the costs assessor was dismissed by the Review Panel and judgment was entered in favour of the solicitors for $188,005.11 and $349,302.42.
In proceedings by the solicitors for a declaration that there was a binding and enforceable agreement as to the payment of legal costs, the clients brought a cross-claim claiming that they were induced to retain the solicitors by misrepresentations as to the likely costs. The solicitors claimed there was a reasonable basis for the initial estimates of costs being $8,500 to $10,000 plus GST for professional costs assuming a hearing of three days in respect of an appeal from a deemed refusal by Lismore City Council to modify an existing consent; and $4,500 to $6,500 plus GST for the professional costs of separate Class 1 proceedings. The clients claimed the total costs of both proceedings were in excess of $1.5 million. The solicitors conceded that there had been a failure to comply with a statutory duty to provide written updated estimates of costs, but denied that the clients had relied upon the estimates provided.
White J found that:[4]
(a) The clients were induced to retain the solicitors by reason of costs estimates for which there was no reasonable basis and which were misleading and deceptive.
(b) Mr Burrell did not believe that there was a reasonable basis for the estimates provided with the estimates being provided so as to secure the clients' prospective business.
(c) The clients were aware soon after the estimates were provided that they were materially wrong and did not rely on the estimates in continuing to instruct the solicitors.
(d) The solicitors' failure to provide updated reasonable costs estimates was not only a breach of the LPA but was conduct engaged in in trade or commerce that was misleading and deceptive or likely to mislead and deceive in contravention of the then s42 of the Fair Trading Act 1987 (NSW) and s52 of the Trade Practices Act 1974 (Cth) and, from January 2011, s18 of the Australian Consumer Law. The provision of initial estimates for which there was no reasonable basis and the failure to provide updated estimates was a breach of the solicitors' contracts of retainer.
(e) The costs assessor's determinations were conclusive that the amounts for which judgments had been entered represented fair and reasonable costs for work done in the proceedings.
(f) Neither the determinations nor the judgments entered pursuant to them created any res judicata, issue estoppel or Anshun estoppel that otherwise barred the clients' claims. This was on the basis that the costs assessor's determinations and the judgments depend on the operation of s372 of the LPA. To give rise to a res judicata, issue estoppel or Anshun estoppel, some kind of judicial or quasi-judicial determination is required.[5]
In determining the damages to be awarded, White J considered that although the Land and Environment Court proceedings were unsuccessful, the work done was not wholly wasted, given that the clients ultimately obtained approval from the Minister for the quarry expansion under the then Pt 3A of the Environmental Planning and Assessment Act 1979 (NSW) and the work done in the proceedings was relevant to that application. His Honour also held that although the clients suffered financial loss as a result of the unsuccessful proceedings, that loss was not caused by the unreasonable initial estimates of costs or the solicitors' failure to update the estimates.
White J held that the clients were entitled to nominal damages from the solicitors for breach of contract in the sum of $20.
Phillipa Alexander is a specialist in legal costs with Costs Partners. PHONE (02) 9006 1033 EMAIL Phillipa@costspartners.com.au.
[1] See the Legal Profession Uniform General Amendment (Costs Disclosure) Rule 2016.
[2] Legal Profession Uniform Law, s178(1)(a).
[3] [2016] NSWSC 303 (24 March 2016).
[4] Ibid, at [6].
[5] White J relying on Cachia v Isaacs (1985) 3 NSWLR 366 at 368-9 and Coshott v Barry [2015] NSWCA 257 (28 August 2015).
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URL: http://www.austlii.edu.au/au/journals/PrecedentAULA/2016/53.html