On 5 May 2023, the Supreme Court of New South Wales Court of Appeal handed down a decision in the matter of Bingham v Bevan [2023] NSWCA 86 which clarified the effect of a finding on assessment that a legal practitioner’s costs agreement is void.
Brief Facts
These proceedings concerned fees billed by Mr Bevan (the Barrister) to his instructing solicitor (the Solicitor) in High Court Proceedings.
The Barrister billed in excess of $300,000 in circumstances where his costs agreement provided an estimate of a total of up to $91,000 plus GST.
Discussion
A barrister engaged by a solicitor on behalf of a client has certain obligations pursuant to section 175 of the Uniform Law to disclose to the solicitor information necessary for the solicitor to be able to comply with section 174(1) of the Uniform Law. This involves disclosing details about how legal costs will be calculated, providing estimates of total costs, and updating this information if significant changes occur. Normally, complying with section 175 involves providing the solicitor with an estimate of the barrister’s fees – and specifically, a single figure estimate of fees. The Barrister sought a costs assessment application in respect of his fees. The costs assessor, Mr Michael Eagle assessed the barrister’s fees and found that he had contravened his disclosure duties. Pursuant to section 178(1) of the Uniform Law, if a law practice breaches the disclosure obligations outlined in Part 4.3 of the Uniform Law, the costs agreement becomes void, and the costs must be assessed. Consequently, the costs assessor determined that the Barrister’s costs agreement was void and proceeded to assess the Barrister’s costs based on fairness and reasonableness (or a quantum meruit basis). The costs assessor issued a Certificate of Determination of Costs, assessing the Barrister’s fees as $323,715.10. This certificate was subsequently registered by the Barrister as a legal judgment, following which a garnishment order was issued. Upon discovering the judgment and garnishment, the Solicitor filed a motion in the Supreme Court to have the judgment overturned. The representative argued that the judgment was irregular or made in bad faith under rule 36.15 of the Uniform Civil Procedure Rules (NSW), as the costs were not yet due and payable due to a "paid if paid" provision in the costs agreement. Justice Walton, however, rejected this motion. The Solicitor then appealed this decision to the Court of Appeal.
Court of Appeal's Ruling The Court of Appeal allowed the appeal and awarded costs, ordering that the garnished funds be returned. In its decision, the Court of Appeal addressed three main issues: (a) What authority did the court have to nullify the judgment entered upon the registration of the Certificate of Costs? (b) Did the invalidation of the costs agreement permit the lawyer to recover their full fees despite the "paid if paid" provision? (c) Did the evaluator have the power to determine that the assessed costs were due and payable, and if so, did the evaluator reach such a conclusion? Court's Authority to Nullify the Judgment Rule 36.10 of the Uniform Civil Procedure Rules states that a costs assessor's certificate can be registered in related or fresh proceedings. From the date of registration, the certificate is treated as a judgment. Rule 36.16 of the Uniform Civil Procedure Rules allows the court to overturn or modify a judgment if a motion is filed before or within 14 days after the judgment is entered. When registering a certificate of costs as a judgment, there is no requirement for the receiving party to give notice to the paying party of its intention to register the certificate as a judgment. The Court of Appeal determined that, in cases where notice wasn't mandatory, procedural fairness dictated that the adversely affected party should have some notice of the judgment's form and a chance to challenge it, stating, at [70]:
70 It may be thought unfortunate that (i) a judgment may be entered based upon a certificate when the time for filing an application for review of the certificate has not expired; (ii) there is no requirement that the judgment debtor be served with a copy of the judgment as entered, and (iii) the affidavit accompanying the filing of the certificate does not require a statement that the costs are presently due and owing.
Effect of the Void Costs Agreement The Barrister argued that since the costs agreement was void, the "paid if paid" provision no longer applied, allowing them to recover their assessed fees from the Solicitor. This argument was accepted by the primary judge, which held that the breach of disclosure provisions rendered the costs agreement legally non-existent and unable to establish rights and obligations between the parties. However, the Court of Appeal disagreed, stating that certain situations could still acknowledge or refer to a void costs agreement under the Uniform Law. The court adopted a purposive approach to statutory interpretation, considering the legislative objective. In relation to this issue, the court referred to section 185(2) of the Uniform Law, which restricts a law practice from recovering more than the amount it would have been entitled to under a valid costs agreement. The Barrister argued that this only applied to breaches of Division 4, not Division 3, but the Court of Appeal rejected this interpretation, emphasizing the purpose of the legislation.
Costs Assessor’s Authority to Determine Payment of Costs The Barrister argued, and the primary judge accepted, that the costs assessor had a statutory duty to determine whether legal costs were payable. Although the question of whether the court had similar authority fell away due to a concession by the Barrister, the Court of Appeal still addressed the issue. The court held that allowing an assessor’s ruling on payment to be conclusive would undermine the court's jurisdiction to decide contractual disputes. The court stressed that a costs assessor's determination of costs payable is not final and can be further reviewed by the court.
Key Points The Court of Appeal's decision provides important guidance on the powers of a costs assessor, the effects of Costs Certificates and their registration as judgments, and the application of the Uniform Law provisions to void costs agreements. Practitioners should be aware that contractual obligations within a void costs agreement might still hold between the parties, even if the agreement can't be relied upon to recover unpaid costs by commencing proceedings based upon the costs agreement. Finally, practitioners should exercise caution when registering Costs Certificates as judgments, considering whether costs are due and payable at the time of registration and whether notice is necessary to avoid potential reversal of the judgment with associated costs.
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