Costs Agreement set aside due to inadequate Costs Disclosure and Assessment Charging Clause.

McLaren v Wiltshire Lawyers Pty Ltd [2019] QSC 305

PROFESSIONS AND TRADES – LAWYERS – REMUNERATION – COSTS AGREEMENTS – where the applicant engaged the respondent and received from it a disclosure statement and a costs agreement which she executed – where the respondent then acted for her in a mediation and performed other work before she fell out with them over the level of their fees – where the costs agreement contained clauses which vested in the respondent a discretion to have its work assessed and to then issue a bill in accordance with that assessment – where no information was given to the applicant about the effect of the clauses before she entered into the agreement – where the applicant seeks an order setting aside the costs agreement – whether the costs agreement was “fair and reasonable” – whether the applicant was induced to enter into the costs agreement by a misrepresentation of the respondent – whether the respondent failed to make disclosures as required by the Legal Profession Act 2007

The Respondent commenced proceedings for unpaid legal fees and placed a caveat over the Applicant’s property. The Applicant in response applied to the Court to set aside the Costs Agreement as it was not fair or reasonable under s328 of the Legal Profession Act . The Respondent represented the Applicant in respect to the Family Court proceedings:

The Applicant argued that:

(a) She was induced to enter into the costs agreement by the misrepresentation of the respondent (s328(2)(a)).

The Applicant contented that the Respondent made representations in the initial telephone call advising of how they bill and that they refer the file to an independent costs assessor to assess the Costs.(41)

The Respondent contended that they did not discuss Costs in this telephone call as they needed to obtain the file from the previous Solicitors before making estimates of Costs. Of particular note His Honour commented that there was a failure for the Solicitor to take file notes of this conversation. His Honour determined that the Solicitors recollection of the telephone call was more likely that the Applicant’s notes of this conversation which was more likely than not to be a post-facto reconstruction.

(b) The respondent failed to make any of the disclosures required under Chapter3 Division3 of the LPA(s328(2)(c)

The Respondent provided estimates of the proceeds being in two stages. Stage 1 was to “to prepare for and attend Mediation or Settlement Conference/Case Assessment Conference. - $1,500 to $10,000 and Stage 2 First Mention/Interim Hearing to Trial - $10,000.00 to $250,000.00.” [59]

His Honour took no issue in respect to Stage 1 however took issue with Stage 2 as the Solicitor made no effort to make a reasonable estimate of Costs. His Honour followed Casey v Quabba & Anor [2005] QSC 356 where the Costs Agreement contained an estimate of between nil and $250,000 which was held to be void. [61]

(c) The respondent should have paid for the costs assessment undertaken at the request of the applicant (s328(2)(e)).

Clause 2.7 stated that “our bills (tax invoices) will be issued in accordance with independent costs assessment” and purported to allow the Costs Respondent to refer the matter to an Costs Consultant to provide an independent assessment of Costs. [34] Under Clause 2.9 it was stated that the client is liable for these fees for the Assessment. The Respondent provided the Applicant a “detailed summary assessment” which in some way went to itemise the attendances. His Honour found that the Respondent could not rely on this assessment was it was not an itemised bill in compliance with the Legal Profession Act. In any event the Respondent submitted that the Applicant was not billed for the preparation of this Assessment. [35]

His Honour determined that the clause was not reasonable were the clause was not brought to the client’s attention. It was held that Solicitors using contractual terms places the Solicitor in a position of advantage not withstanding that the client was not charged for the Assessment in any event. [38]

Conclusion

His Honour in respect to questions (a) and (c) determined the Costs Agreement not to be reasonable and set aside same. It was Ordered that Costs were to be assessed on the Family Court Scale of Costs which is less than 50% of what the Solicitors hourly rate as in the Costs Agreement.

Also important is to take a file note of each conversation.