Tag Archives: Costs Barrister

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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Another Costs Agreement Cancelled – [2015] WASC 54

The Supreme Court of WA has cancelled another costs agreement on the grounds of unreasonableness. The decision is Portuguese Cultural and Welfare Centre v Talbot Olivier Pty Ltd [2015] WASC 54.

I am a member of the Costs Committee of the Law Society of WA. Decisions relating to legal costs and the cancelling of costs agreements are of particular interest to me.

The Decision

To give a short background to the decision, the Portuguese Cultural and Welfare Centre was an unincorporated association which operated a community radio station. Mr and Mrs Moleirinho were husband and wife and involved in the running of the Association. They signed three costs agreements on behalf of the Association and also gave guarantees in relation to the payment of fees.

Been January and March 2008, the Australian Communications and Media Authority (ACMA) were considering refusing to renew the licence required by the Association to continue to operate the radio station.

The Association engaged Talbot Olivier to act for them.  The Association, Mr Moleirinho and Mrs Moleirinho entered into three costs agreements with Talbot Olivier.

The first costs agreement was entered into after the ACMA had expressed a preliminary view that the licence would be cancelled. The second costs agreement was made around 13 March 2008 after the ACMA decided to cancel the licence. The third costs agreement was entered into on 20 March 2008 after a resolution was passed by the Association to seek a review of the ACMA’s decision and despite receiving advice the previous day not to seek a review.

The application for review had to be filed by 20 March 2008.

The Applications to Cancel the Costs Agreements

Proceedings were originally commenced by the Association, Mr Moleirinho and Mrs Moleirinho to cancel all three costs agreements. Those applications were dismissed by Hall J: Portuguese Cultural and Welfare Centre v Talbot Olivier Pty Ltd [2013] WASC 91.

After a partially successful appeal, Mr and Mrs Moleirinho’s application in respect of the third costs agreement only, was remitted to be re-determined by the general division.

In the particular circumstances of this case, Corboy J cancelled the third costs agreement. His Honour did not rely on any one particular aspect of the agreement itself or any one particular circumstance preceding the entry into the costs agreement. Rather, his Honour concluded that the sum of all of the circumstances justified the costs agreement being cancelled.

In short, the third costs agreement was cancelled by reason of a combination of:

  1. the advice in relation to the review application was only delivered on 19 March 2008, being the day before the review had to be filed;
  2. the third costs agreement provided for some work which was already covered by the second costs agreement, namely the preparation and filing of the review application;
  3. the third costs agreement was received by Mr Moleirinho during the afternoon of 20 March 2008, meaning that only a very short amount of time was available to consider the costs agreement;
  4. Mr Moleirinho understood, perhaps wrongly, that Talbot Olivier would not file the review application until the costs agreement had been signed;
  5. the filing of the application for review could have occurred under the terms of the second costs agreement;
  6. Mr Moleirinho signed the costs agreement on behalf of his then absent wife; at the suggestion of the lawyer; and
  7. Mr Moleirinho was not given any advice to seek independent advice on the costs agreement.

Comment: Applications to cancel a costs agreement are on the rise. Solicitors should take great care when entering into costs agreements with clients to avoid a subsequent application seeking to cancel their costs agreement. I accept instructions in this area. Contact me by email or by using this link.

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