Bell Lawyers Pty Ltd v Pentelow partially overturned. Law firms as litigants may recover (some) costs of their employed Solicitors.
- Paul Cameron
- Sep 8
- 4 min read
Practice and procedure – Costs – Work performed by employed solicitor – Where first and second respondents are remaining partners of unincorporated law firm which obtained costs order against appellants – Where costs were sought for work undertaken by employed solicitors of unincorporated law firm – Whether order for costs in favour of an unincorporated law firm entitles firm to obtain recompense for legal work performed by employed solicitors of firm.
INTRODUCTION
The Applicant appealed to the High Court from a decision of the NSW Supreme Court that allowed that a law firm as litigant may recover the costs of their employed Solicitors
GAGELER CJ, GORDON, EDELMAN, GLEESON AND BEECH-JONES JJ.
The majority held that the lower court’s decision should be upheld and that a law firm should recover the fees of an employed Solicitor It was noted that Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29 ( Bell Lawyers) overturned the Chorley exception where a law firm as litigant may recover their legal fees. Bell Lawyers held that a law firm as litigant may not recover their fees as it would be inequitable where a self-represented litigant could not recover their fees.
The Majority noted the distinction between Government Lawyers/ In house Solicitors being able to recover costs and self-represented parties being able to recover their legal fees. The Majority noted Bell Lawyers which stated that “on the footing that the actual cost to [the employer] of the legal services provided by its employed solicitor would not exceed, in any substantial amount, the sum recoverable by [the employer] for professional legal costs”
The majority followed Cachia v Hanes (1994) 179 CLR 403 at 410 where it was held that costs were a "reimbursement for work done or expenses incurred". The Majority also held that “The costs would be awarded in the same manner as a quantum meruit, upon which "usually the value of services is assessed by reference to charges commonly made by others for like services". [36]
When determining that Law-firms can recover their costs of employed Solicitors the Majority determined that United Petroleum Australia Pty Ltd v Herbert Smith Freehills (United) [2020] VSCA 15 should be overturned. United held that as there was no independence of an employed Solicitors from that of their supervising partner a law firm cannot recover their legal fees of their employed Solicitors.
At 25 it was held that a Law firm can recover “the expenses of the salaries and overheads associated with having that legal work done by their employees constitute professional legal costs actually incurred by the solicitor or firm.” And at 31 it was noted that an award for costs should be quantified on assessment for expenses occurred by way of expenses and remuneration. [31]
STEWARD J.
Justice Steward in dissent determined that Bell Lawyers should not be overturned or corrected. Justice Steward followed United and concurred that an employee does not have sufficient independence from that of their supervising partner. It was noted that in United the Partner was the Solicitor on the record for the law firm. As such there was not material difference between that of the Partner and the Solicitor. The proceedings were against the partnership and as such there could be no material separation from that of an individual partner. [46]
Steward noted Bell Lawyers where it was that held employed Solicitors appeared in proceedings to represent their employers whether that the be the Government or others. It was noted that an organisation “… is represented by the employed solicitor, and an issue which has then arisen at times is what amount of costs should be recoverable given the employment relationship." [56]
Justice Steward noted in Bell Lawyers At [58} that “remuneration” as referred to at s 3(1) of the Supreme Court Act referred to “employee solicitors of government departments and corporations, and no more”
JARGO J
Justice Jargo also distended holding that Bell Lawyers was good law on the basis an employed Solicitor was not truly independent and that a law firm should not profit from litigation. In particular Justice Jargo followed Bell Lawyers where it was held that “it is productive of a situation in which a successful litigant is permitted not only to recover the amount of the verdict but also to profit from the conduct of the litigation” and United at [109] where it was held that a significant rationale for the Chorley exception was to permit a solicitor to recover for the time spent by his or her employees.
Importantly Justice Jargo noted that Employees Solicitors of Government and Corporations act under instructions and are not part of the “controlling mind” of the organisations. Instructions from Government and Corporations ultimately come from Ministers or the Board of Directors who are not (generally) Solicitors and are (generally) not on the record. [93]
APPLICATION OF THE LAW IN QUEENSLAND
Under rule 702 and 703 of the UCPR costs may be awarded on a standard and indemnity basis. Awards for costs under an indemnity basis are usually claimed for on a time basis. Orders for Costs on a standard basis are claimed pursuant to the scale.
It appears that the Court has determined that law firms can recover the wages of expenses of the employed Solicitors actually incurred and not what would be otherwise invoiced by the firm/ Solicitor. This would be a portion of what would be otherwise invoiced by the firm.
Costs Orders.
Any award for costs must be pro-rata adjusted to consider the difference between invoiced professional fees or Scale and the wages, benefits and overheads of the employed Solicitor
Conclusion.
Accordingly; Bell Lawyers was not overturned but clarified. Law firms can obtain partial indemnity to that of what would normally be recoverable on a standard or indemnity basis under the Chorley exception ( London Scottish Benefit Society v Chorley [1884] UKLawRpKQB 115; (1884) 13 QBD 872)
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