Court of Appeal on Cancellation of Costs Agreements for Failing to Give Estimates

The Western Australian legal profession received a small win last week, when the Court of Appeal handed down their reasons in Lewis Blyth & Hooper v Smith [2015] WASCA 47.

Owing to my particular interest in legal costs disputes, I was eagerly awaiting the reasons in this matter.

The facts can be shortly summarised as:

Mr Smith was an experienced businessman who had often instructed lawyers. During 2006, Mr Smith instructed Lewis Blyth & Hooper (‘LBH‘) to act for him in relation to two matters, a Probate dispute and a dispute relating to the appointment of a trustee.

Mr Smith was provided with a costs agreement and costs disclosure in relation to the Probate action. Mr Smith did not initially sign the documents but continued to provide instructions to LBH.

The Probate action was eventually settled. LBH had rendered accounts totaling $109,714.51.

After the Probate action had settled, Mr Smith provided instructions in relation to the Trust action. Mr Smith was again provided with a costs agreement and costs disclosure.

In relation to both actions, the main argument advanced by Mr Smith was that he did not receive adequate costs disclosure of the total costs he might incur in the actions.

Mr Smith then filed applications to cancel both costs agreements. Those applications were granted, her Honour having found that the failure to give an estimate of costs in each action meant that the costs agreements could be regarded as unreasonable.

Her Honour found that the failure to give costs estimates were a sufficient reason to deem the costs agreements to be unreasonable.

Importantly, from an appeal perspective, her Honour also found that the failure to give an estimate of costs was only basis upon which Mr Smith could demonstrate unreasonableness in the costs agreements.

The Appeal

Her Honour’s statement of the relevant legal principles was not contested on appeal.

The first ground of appeal – the only ground that succeed – was that her Honour erred by concluding that the Trust dispute costs agreements was unreasonable solely by reference to the failure to give an estimate of costs. LBH argued that the failure to give an estimate of costs was only one of the matters relevant to the circumstances in which the costs agreements ‘came into being’.

Mr Smith accepted, on appeal, that her Honour had determined both costs agreements were unreasonable solely due to the failure to give an estimate of costs.

The Court of Appeal examined the circumstances surrounding the entry into the Costs Agreement and noted when the Trust dispute costs agreement was entered into:

1. Mr Smith was a mature, experienced businessman who had instructed lawyers on numerous occasions;

2.  Mr Smith was familiar with the rates and charges of the appellant and had experience of the level of fees chargeable for contested and uncontested matters;

3. Mr Smith previously had independent advice about the Trust action;

4. Mr Smith discussed with LBH that costs would be hard to estimate, but that they would likely be very substantial – that it would involve an examination of a 50 year period, which would be very time consuming and expensive;

5. Mr Smith was aware that the proceedings would be time consuming and expensive but that he did not care as he did not want his relatives to get away with it;

6. Mr Smith was aware that he could terminate his lawyers instructions (as he had done that with previous lawyers); and

7. that it could be inferred that Mr Smith was aware that absent the costs agreement, the appellant could only charge according to scale.

Taking into account all of the circumstances surrounding the entry into the Trust action costs agreement, the costs agreement was not unreasonable.

Outcome

The ultimate result of the appeal is that the Probate action costs agreement will remain cancelled and those costs will be assessed by reference to the applicable scale of costs.

The Trust action costs agreement will stand, and those costs will be assessed by reference to the costs agreement.

I am always interested in hearing from people who take a similar interest in legal costs. I can be contacted by email or through my website.

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