The Elephant in the Court Room

Guidelines on Itemised Bills

Following on from my previous post on itemisation of counsels' fee memos, my attention has been drawn to draft guidelines on itemised bills, published by the Queensland Legal Services Commission.

The Commission's website states that it:

"develops and publishes two kinds of policies and guidelines - policies and guidelines we develop and publish for the benefit of the profession to assist practitioners to better understand their professional obligations in areas that have proved problematic, and policies and guidelines we develop for use in-house and that we publish in the interests of transparency."

I applaud the Commission in publishing such guidelines.  Often practitioners are unaware of their duties and obligations, and the ethical issues surrounding the practitioner/client relationship.  A recent discussion in our office centred around how frequently we see solicitors charging their clients for preparing their bills to their clients, dealing with the client when the client queries bills, and the like.

The test is always - did the work benefit the client?  If it was only to the lawyer's benefit, it is rarely (if ever) chargeable to the client.

Other guidelines published by the Queensland LSC relating to charging for outlays and disbursements, charging fees in speculative personal injury matters, and aspects of advertising.  I recommend all practitioners visit the site, whether they are Queensland based, or not.  

What does the law firm of the future look like?

In April 2009, lawyers, clients and law students predicted what the firms of the future would look like, in a competition at Indiana University - Competitors envision law firms of the future: IU News Room: Indiana University .  The aim was to structure a firm which would thrive for a further 20 years.

Common themes were alternative fees, a collaborative working environment and a focus on efficiency.

Three years one, what progress has been made?  Alternative fees are definitely on the agenda and increasing.  Good firms are focussing on the other two, with efficiency measures going hand in hand with profitable alternative fee arrangements.  Collaborative working environments still have some way to go.

But there remain too many firms who are taking no steps to change.

How many will still be in existance in 2029? 

For those who aim to be thriving in 20 years, consider attending a Firm of the Future forum in Australia in March 2012.  Guaranteed to be interesting, thought provoking, and full of ideas to ensure your firm thrives.  

How detailed do Barristers' fee memos need to be?

This question was in issue in a taxation in the Victorian Costs Court last year.  Counsel for the party seeking to review counsel's fees  submitted that entries in the fee memo detailing  "Reading and preparation" were not sufficiently particularised to allow the lawyer and client to determine what documents were read or what was prepared and whether the time claimed for that work was reasonable.  This was despite the fact that the solicitors seeking to review the fees were present at most if not all of the conferences claimed by counsel.  Counsel's costs agreement distinguished between "Reading brief and advising" and "Preparation and conferences", and it was argued that the fee memorandum should also provide a breakdown of time spent "Reading brief", "Advising", "Preparation" and "Conferences".  It was not sufficient to have global fees for "Reading and Preparation".    

The cases of  Clayton Utz Lawyers v P & W Enterprises [2011] QDC 5 and Bartex Fabrics Pty Ltd v Phillips Fox (1994) 13 ACSR 667 were relied on as authority for the proposition that an itemised bill must contain such detail as will enable the client, or those advising him, to determine whether to seek a review of the costs claimed, and that general statements as to time spent reading documents are not sufficiently itemised.

Counsel for the barrister sought to distinguish these cases on the basis they relate to solicitors rendering invoices to clients whereas counsel was rendering fees  to his instructing solicitor in circumstances where the solicitor was aware of the nature and volume of material contained in the brief, and was present at the conferences claimed by counsel.  In those circumstances, the memorandum of fees was sufficiently itemised to allow the solicitor to determine whether the time claimed by counsel for reading and preparation was reasonable or whether to seek a review and to advise the clients accordingly.

His Honour Associate Justice Wood held that the memorandum was not sufficiently itemised.  In the context of the costs agreement, the time spent by counsel reading and preparing should not be lumped together and notes of conferences  should refer to the parties in attendance.

We see many fee memoranda from counsel which, in light of His Honour's comments, would not be held to be sufficiently particularised.  This is an issue for both solicitors and counsel, particularly in light of the rulings in Feesty v Henty Jepson & Kelly that clients cannot review counsel's fees unless there is a direct retainer between counsel and the client.

The New County Court Scale, cost orders and the Slip Rule

It's an appropriate time to consider the application of the slip rule to vary cost orders. This is in light of the new County Court scale which includes a scale of counsels fees and by implication, provides that the Cost Court has no discretion in relation to counsels fees where costs are payable pursuant to an order of the court.

It's long been the case in the County Court, that the Costs Court had no discretion in relation to counsels fees where they  were payable pursuant to an order of the trial judge. The new scale extends this to any order of the court, whether final or interlocutory, and will include circumstances where orders are made by consent.

The principle Victorian case in relation to the application of the slip rule on cost orders is Sands & McDougall (Wholesale) Pty Ltd (in liq) & Anor v Commissioner of Taxation.

In considering the applicaiton of the rule in circumstances where a party was arguing the application of order 26 entitled it to solicitor client costs, Brooking JA stated:

"This is the impossibility of saying, with the necessary degree of conviction, that an award of solicitor and client costs would have been made had the matter been drawn to the attention of the Court of Appeal."

The bar is high, and it will not be enough to simply argue that it was an oversight not to seek certification of counsel's fees.  

The particular question of variation of a cost order to accommodate counsels fees, where there was a consent order, was considered in English case of Somerset v Ley [1964] 1 WLR 640, which was cited at length in M v. W (No. 2) [2009] QDC 344.

The plaintiffs were executors of an estate.  In proceedings involving the estate, consent orders were made that the plaintiffs’ costs should be taxed and paid out of the residuary estate of the testator, but there was no express provision for the fees of senior counsel who had been engaged on behalf o the plaintiffs. The taxing master held that the relevant rules required the order to expressly allow for senior counsel's fees, otherwise they could not be allowed on taxation.  The plaintiffs appliedto the court, asking either that a certificate for those costs should now be granted, notwithstanding that it had not been asked for at the hearing, or that the order should be amended under the slip rule to provide for them.

It was held that, the order having been a consent order, it could only be amended under the slip rule to include a provision for the fees of leading counsel if the agreement between the parties upon which it had been based had contained, expressly or by implication, a term to the effect that they should be provided for.

Cross J said at 646-47:

 “I think it is quite clear that none of the lawyers who prepared and approved the minutes and were present at the joint consultation had this point in mind. In those circumstances, I think that the test of the problem before me is this: supposing I, when the case came before me, had thought of the point and had played the pat of the officious bystander postulated by Mackinnon L.J. and had said: “What about the costs of the plaintiffs’ ‘leading counsel?’, what would the reaction have been? I have no doubt whatever that counsel for the plaintiffs would have said: ‘Of course they are to be included.’ What would have been the reaction of counsel for the infant? Mr Wilmers is in a difficult position, because he is asked to throw his mind back to what would have happened two years ago on a hypothesis which was not in fact realised, but he says, and I accept this completely, that he is sure that he and Mr Arnold, whatever their own views might have been, would have felt obliged to consult the guardian ad litem as to whether or not the words, “including the fees of ‘leading counsel’ should go into the order. Mr Wilmers said that he remembered vividly that it had not been at all easy to bring the guardian to the point of agreeing to a compromise at all, and that neither counsel nor their instructing solicitors would in the circumstances have taken it on themselves to vary the agreed terms by a hair’s breadth without her consent.

 So one has to ask what was her state of mind. Here I am in a difficulty, because no formal evidence has been put before me as to what her state of mind was. She has not sworn an affidavit or been examined but certain points have been conceded by Mr Wilmers. It is conceded that she knew that leading counsel had been instructed on behalf of the plaintiffs, and I think it is conceded (at all events, I shall assume) that she had no personal knowledge of paragraph 2(3) and did not interpret that she had not had put before her any estimate of the costs which included specifically any fees for leading counsel.

 I think that I am justified in assuming in favour of the plaintiffs that had she been asked before the order was drawn up: “Do you think this order will include leading counsel’s fees?”, she would have said: “I think it will. They have had leading counsel. The costs will be taxed by the court, but I presume they will include something for Mr Peter Foster.” That is what I think she would have said.

 But does that carry the plaintiffs far enough? If this point had been specifically mentioned to her, if Mr Arnold and Mr Wilmers had come to her and said: “Look here, the formula which we have put to the other side and which they have agreed may not include the costs of leading counsel, and they want an express reference made to them,” is there anything which would have prevented her, if she had been disposed to be difficult about the matter, from saying: “Well, I do not know about that. If that formula will not include the costs of leading counsel, that is just too bad. But I am not disposed to budge a hair’s breadth from what I have agreed to.” With the best will in the world – my sympathies, as I have indicated, are with the plaintiffs in the matter – I find it impossible to say that she could not, if she so desired, have taken that line. Therefore, I am, with regret, obliged to refuse the application. I say ‘with regret’ because I cannot help thinking that if the matter had been raised in October 1961, Mr Arnold and Mr Wilmers would probably have advised the guardian ad litem that it was in the spirit of the arrangement that this addition should be made to the order, and it may be that at that date, under pressure from them, and perhaps with a little help from me, she would have agreed to that addition. Unfortunately, that was not done, and now Mr Wilmers tells me that he and his instructing solicitors have done their best to induce the lady to agree, but that she will not now do so. So, as I say, with regret, I feel obliged to refuse the motion.”

Bills in taxable form

I have recently been looking at the circumstances in which a party can be required to provide a bill in taxable form.  The decision in Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw No 651 Pty Ltd & Anor  is a decision of the Court of Appeal which, whilst its principal focus was the meaning of "reasonable costs" in the context of litigation arising out of an insurance policy, one of the subsidiary issues was the circumstances in which a bill of costs in taxable form should be required.

The case was an appeal from a VCAT decision, where the award of "reasonable" costs had been held to mean the costs which the party was actually paying to its lawyers.  No bill in taxable form had been delivered, but simply a schedule detailing the time recorded.  At first instance, the Member had refused an application seeking a bill in taxable form.

The Court of Appeal took a different approach to the interpretation of the costs order, but in any event, in considering the circumstances in which a bill of taxable form should be provided stated as follows (per Ormiston J) at paragraph 86: 

"Generally speaking, moreover, even where costs are to be assessed or taxed on a solicitor/client or indemnity basis, that is no excuse for refusing to deliver a bill, unless the parties agree to the contrary or unless court or tribunal directs to the contrary. Every form of taxation may require consideration of items of detail, although the basis of taxation may qualify the kind of bills that should be delivered, as may specific rules or regulations on that subject.

In ordinary litigation, whether or not conducted in a tribunal, prima facie a bill should be delivered for consideration by opposing party and by court or tribunal. Even in the case of costs taxed on an indemnity basis, it is open to the unsuccessful party to object that particular items are unreasonable, just as on a solicitor/client basis it is for the judgment creditor to establish that items are reasonable, howsoever that may be achieved in particular circumstances... What is more important is that in considering costs below there was a failure to distinguish between the reasonableness of the rate charged per hour or the like, and the reasonableness of the items of work performed and the extent of time taken to perform them, to touch only on matters affected by hourly rates of payment. A bill is ordinarily required so that the parties and the court or tribunal can properly ascertain what properly has been done in the necessary enforcement of a party’s rights, so that particular items may be taxed off if they do not satisfy the relevant criterion. It is sufficient to say that a bill should have been directed in the present case." 

The decision is important in the context of indemnity cost orders, where occasionally a party will simply seek to rely on a printout of time charged (as was the case in Maclaw).  The issue really becomes one of whether a time printout is a sufficiently itemised to constitute a taxable bill.

The following passage (per Mann J) in Mallesons Stewart, Stawell and Nankivell v Williams  is often cited with approval in cases considering the delivery of itemised bills .

Courts have repeatedly held that a bill of costs must contain such details as will enable the client to make up his mind on the subject of taxation, and will enable those advising him to advise and effectively as to whether taxation is desirable or not." 

The adequacy of a bill must be considered in light of the level of the client's sophistication and commercial experience and would it include "any agreement reached between the parties as to the basis of charge."  - Re Walsh Halligan Douglas's Bill of Costs (1990) QDR 288 at p 294.

Further, the client or party seeking further particulars in the bill must show that there is not a sufficient information, not simply on the face of the bill, but also the other information available to him, to enable those advising him to provide proper advice.  in other words, if the client or party had available to him through other means sufficient information to take an informed view on the bill, it will not be sufficient that an uninformed person would find the bill was not sufficiently particularised.  Ralph Hume Gary v Gwillim  (CA) [2002] EWCA Civ 1500; (2003) 1 WLR 510.

In the context of a practitioner/client dispute this question was considered in Clayton Utz Lawyers v P & W Enterprises Pty Ltd [2010] QDC 508.

In the Clayton Utz case, the proceedings before the court were an application by Clayton Utz under the Legal Profession Act 2007 (Qld) for assessment of its own legal costs.  The question for the court was whether the bills of costs, which appear to be detailed to the extent that they set out the individual time records, constituted "itemised bills" the purpose of the Legal Profession Act.   The defendant argued that many items charged in the bills were grouped items of work with a single lump sum charge and in respect of those it was not possible for the defendant to assess whether or not the charges for the individual items were proper.  The defendant argued that a bill must be sufficiently particularised to enable a client to "know the grounds on which it disputes the amount or liability to pay any particular item of costs".

Many of the descriptions in the bills of costs with very generalised with examples being given such as "various activities including letter to Dibbs Barker re Mitchell Brandtman report; prepare response to show cause notice; peruse affidavits and email to counsel re same."

Reid DC J held that such generalised descriptions would not enable "a reasonably experienced litigation solicitor" with the benefit of input from the client, to form an opinion as to the reasonableness of the work performed.  His Honour ordered the delivery of properly particularised bills.

Cost Implications on dismissal of a counterclaim or third party claim

We've recently come across an inconsistency in the Supreme, County and Magistrates Court Rules, with implications that litigators should be alert to.

Order 63A.16 of the County Court rules provides that dismissal of a counterclaim or third party claim carries costs with it, unless the court otherwise orders. No such provision exists in the Supreme Court Rules.

The reason that litigators should be aware of this rule is that there are many instances where such claims are dismissed without adjudication on the merits, or because they are settled. In such circumstances, consideration may need to be given as to whether an order should be sought, specifically providing that no costs are payable, or awarding costs to the claimant.

On the other hand, because of the absence of the provision in the Supreme Court Rules, when finalizing a matter, consideration must always be given as to the appropriate orders to be sought regarding the costs of a counterclaim or third party claim.j