Uniform Law on costs

Are you a lawyer who likes getting paid?

Then if you are in Victoria or New South Wales you should know the provisions of the new Uniform Law as it relates to lawyers’ costs.

Here is a paper I have prepared on the subject.

I have also done two earlier blogs on the Uniform Law:

Estimating the costs of an impending litigation for disclosure purposes

You are a solicitor about to open a new potential litigation file. It might go all the way to the High Court. But it also might settle in response to your very first letter of demand.

The only real certainty about it is that the new Uniform Law requires you to give your client a written disclosure “as soon as practicable after instructions are initially given” which  must include “an estimate of total legal costs.”  You must then promptly update that disclosure ever thereafter when there is a “significant change to anything previously disclosed” (see s 174 of the Uniform Act).

What does that all mean? This early in the life of the Uniform Law, nobody can be certain but if you get your disclosure wrong (initially and/or subsequently) your costs agreement is likely to be rendered void as a consequence (see s 178(a) of the Uniform Act) and collecting payment will become slow and problematic as a consequence.

So get your costs disclosure right.

Here are some suggestions (but no promises) as to how to go about it.

  1.  Start with one of the Law Institute of Victoria’s disclosure template documents available here. By all means modify the LIV’s wheels to suit your particular situation but don’t reinvent them altogether.
  2. Make your costs estimate sensible. Your client might be dismayed with the bottom line estimate but everyone will be happier to see that figure upfront in an estimate than to be ambushed by something similar in the final bill.
  3. Make the costs estimate transparent to your client. An Excel spreadsheet where you (and the client) can manipulate the variables might be a great way to start. (Help yourself to the template version below.)
  4. Be candid with your client as to the vagaries of both litigation and your estimate. Maybe your client’s case will be quick and simple. But maybe it will become the Battle of the Somme instead, complete with counterclaims, interlocutory skirmishes, third and fourth parties and some stern appellate action to top it all off. Your guess at the very start is possibly only slightly better than your client’s. Don’t pretend otherwise.
  5. Sign the client up to a costs agreement. Again, be guided by the Law Institute precedents.
  6. Having done all of the above, test your client’s comprehension of the strategy and costs being embarked upon. File note it. (Seriously, file note it. You might need those file notes years down the track if your client suggests that language/stress/other issues impeded his/her comprehension of the costs disclosure sufficiently to constitute a breach by you of s 174(3) of the Uniform Law.)
  7. When your costs disclosure then seems complete – remind yourself that it probably isn’t. Your ongoing disclosure obligations endure until the file is actually closed.

Some thoughts on the accompanying spreadsheet
I have drawn the spreadsheet below as an aide-memoire for solicitors attempting to estimate future solicitor/own client costs for Uniform Law disclosure purposes. Inevitably, it will need modification for each actual case.

For template purposes, I have done it for a hypothetical commercial case in the Victorian County Court. The rates I have utilized are derived from the County Court scale (which is, of course, 80 per cent of the Supreme Court scale – see this blog.)

I have made the following viable (but not inevitable) assumptions which might or might not apply to your case. (Change the variables and add or delete new row items to suit your particular client’s anticipated case.)

  • The spreadsheet is for a prospective plaintiff;
  • There is no conditional costs agreement (eg no win/no fee) arrangement proposed;
  • There will be a single claim against a single defendant;
  • There will be no counterclaim, third party claim or similar;
  • There will be no pleading amendments by either side;
  • All directions will be made ‘on the papers’ and by consent;
  • There will be a single contested interlocutory application;
  • There will be a single mediation;
  • There will be a four-day trial with a reserved judgment handed down on an eventual fifth day with short argument that day as to costs, interest and the final form of the Court’s orders;
  • There will be two expert witnesses, (eg an accountant and an engineer) for the plaintiff and no lay witnesses for the plaintiff requiring payment for their attendance;
  • Everything will happen in Melbourne without anyone claiming circuit fees, travel expenses or similar;
  • The barrister will do an initial advice as to merits, draw the statement of claim, do an advice as to evidence, remain involved incidentally throughout the matter and will charge the equivalent of 10 hours’ preparation for each anticipated full day in Court;
  • The solicitor and the single (senior) junior barrister will each charge the client the maximum County Court scale rates applicable to them as of November 2015 (ie solicitor $302.40 per hour and the barrister $432 per hour / $4316 per day in Court) (plus GST in both cases); and
  • There will be no appeal.

Note that because of the technical limitations of WordPress (which hosts this blog) the Excel / Numbers functions formerly embedded in the table below have been lost in posting it here. You can resurrect the table and its functions for your own use by –

  • copying and pasting the table from this blog back into your own Excel / Numbers spreadsheet;
  • restoring the functions manually (eg in Excel you make the formula in D2 read “=PRODUCT(B2:C2)” and then replicate it for the remaining rows;
  • insert/delete rows and increase/decrease the rates and duration estimates to suit the circumstances; and
  • use “AutoSum” to calculate the total.

You might even email a version of your spreadsheet to your client so he/she can also manipulate some of the variables. Emphasize to your client that you are providing an estimate – not a quote and that the defining characteristic of commercial litigation is that it never goes entirely according to the script.

Some parting cautions
Three final issues occur to me that might be prudently flagged as part of your disclosure to your client. (Neither is apparent in the Uniform Law or my spreadsheet.)

  • Most litigation settles well before trial. Some settles during the running of the trial. Of the relatively few cases that run to judgment, some are appealed but most are not. The combined effect of these disparate possibilities is that your initial estimate might legitimately undershoot or overshoot the eventual total that you charge your client drastically.
  • Losers will usually be ordered to pay the winner’s costs. This means that the figure in your compulsory Uniform Law estimate is likely to be substantially wrong in practical net terms. The final, post-trial, net figure your client pays for lawyers’ involvement in the litigation is likely to be much higher or lower than your Uniform Law estimate, depending on whether your client is on the right or wrong end of a substantial costs order.
  • Once embarked upon, litigation can seldom be unilaterally abandoned without adverse costs consequences – see for example Victorian Supreme Court Rule 63.15 and County Court Rule 63.15 about the cost presumptions upon the filing of a notice of discontinuance. This makes dangerous the widely-held view that costs can and should be estimated to prospective litigants as a sequence of distinct figures. Lay clients might reason from an overly segmented disclosure that if they are not enjoying the litigation ride, they might easily and cheaply, unilaterally quit along the way as if alighting from a bus at one of its usual stops. Alas, life and litigation just isn’t as simple as the authors of the Uniform Law apparently believe.

What guarantees do I offer about the spreadsheet? None but any bouquets or brickbats about it are welcome all the same.

Category of legal work estimated time estimate in hours (assume 1 day =10 hours) hourly /unit charge approx total charge
Pre-litigation investigation & negotiation (solicitor) 20 $302 $6,048
Brief to advise (barrister) 10 $432 $4,320
Writ & statement of claim (barrister) 10 $432 $4,320
Filing fee $814 $814
Brief as to evidence (barrister) 10 $432 $4,320
Preparation for and attendance at mediation (solicitor) 6 $302 $1,814
Preparation for and attendance at mediation (barrister) 10 $432 $4,320
Mediator’s fee (half share) $2,000 $2,000
Mediation venue hire (half share) $300 $300
Interlocutory application (solicitor) 10 $432 $4,320
Interlocutory application (barrister) 10 $432 $4,320
Fees for Expert # 1 – report and appearance as expert witness 30 $362 $10,860
Fees for Expert # 2 – report and appearance as expert witness 30 $362 $10,860
Solicitor’s general preparation (including attendances on client, experts, counsel and court, correspondence, offers of compromise, discovery, notices to admit, expert witness notices, preparation of court book etc) 100 $302 $30,200
Trial preparation (barrister) 45 $432 $19,440
Setting down fee $962 $962
Hearing fee (per day of trial from day 2) 3 days $500 $1,500
Solicitor instructing in Court 45 $302 $13,590
Barrister – appearance at trial 40 $432 $17,280
Barrister – taking judgment 5 $432 $2,160
Misc disbursements (eg process servers, company searches, couriers, subpoenas etc) $2,000 $2,000
Trial transcript (4 days @$2250 per day) $10,000 $10,000
TOTAL ESTIMATE $155,748 (plus GST)

Retail tenant ordered to pay its landlord’s costs. Again.

In May this year I blogged (here) about the retail tenant that won a VCAT claim and received nothing but an adverse costs order for its trouble. Subsequently the tenant appealed the costs order (but, interestingly, not VCAT’s refusal to allow it damages) to the Court of Appeal.
The Court of Appeal (comprising Hansen JA, Ferguson JA and McLeish J) delivered its decision last Thursday. The joint judgment was more bad news for the tenant.The decision is 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSC 8216.
In a nutshell, the Court of Appeal said that VCAT’s Judge Jenkins sitting at first instance had set her reasoning out sufficiently and that it was “only in exceptional cases” that leave to appeal from a costs order would be granted. Leave to appeal was accordingly refused with the further comment that even if leave to appeal had been granted the appeal would still have been dismissed.
My colleagues Robert Hay QC and Sam Hopper have respectively blogged about the appeal decision here and here with Hopper suggesting that the decision might discourage some weaker retail claims in what is usually a ‘no costs’ jurisdiction.
The Court of Appeal, of course, has never been a ‘no costs’ jurisdiction. Although it is not apparent from the judgment, the landlord last Thursday made a Calderbank-based application for costs of the appeal on an indemnity basis. Finally there was a small win for the tenant. It was ordered to pay the landlord’s costs of the appeal but only on the standard basis.

Mitigation, GST and intersections; should defendants pay plaintiffs’ claims on a GST-inclusive or exclusive basis?

Mr Millington drove through a red light and hit a garbage truck. His insurer admitted as much.  It also accepted liability entirely. And it admitted that the garbage truck’s owner had incurred repair costs and associated losses of almost $50,000. But it baulked at paying that amount in damages.

So the garbo sued.

Millington’s insurer defended. It argued that the garbo’s claim was based on GST-inclusive amounts such as the total of the repairer’s invoice. As a business, the insurer reasoned, the garbage collector should inevitably get a GST input credit for one eleventh of such GST-inclusive totals and hence the true ultimate cost to the garbo was only ten-elevenths (i.e. the GST-exclusive amount) of the amounts that the garbo was claiming in court.

The plaintiff garbo dug in. It answered that while it was entitled to a GST input credit for the GST in the repair bill etc, it did not intend actually claiming that credit. And besides, even if it was to claim the GST input credit, why should it be out-of-pocket for the period between paying the GST-inclusive repair bills etc and the taxman’s subsequent allowance of the input credit from those bills?

The Supreme Court and the Magistrates’ Court gave different answers.

At first instance, the Magistrates’ Court ordered the defendant to pay the plaintiff the GST-inclusive total claim but it also ordered that the plaintiff subsequently refund to the defendant an amount equal to the GST content of the claim.

The defendant (or rather Mr Millington’s insurer in his name) then appealed to the Supreme Court.

The decision was handed down last month in Millington v Waste Wise Environmental Pty Ltd [2015] VSC 167.  Ironically, by the time the appeal got to the Supreme Court, the parties had actually agreed that the appeal should succeed but Croft J. applied the brakes. He observed that superior courts could not simply overturn inferior court orders by consent of the parties so he required submissions from the parties and allowed the involvement of an amicus curiae.

The appeal had three grounds.

Firstly, the Millington camp contended that the magistrate’s orders for separate payments in opposite directions offended the “once and for all” rule for damages awards. Croft J. agreed (although he noted a certain elasticity in that rule at the conclusion of a review of authorities which he characterised as tending to muddy already opaque waters).

Secondly, the appellant argued that the magistrate’s orders offended the compensatory principle (i.e. the object of an award of damages is to provide a sum of money the effect of which is to place the party who was injured in the same position they would have been in if they had not sustained the wrong for which they are being compensated). Again Croft J. agreed (although in obiter he noted the possibility that interest on a GST input might be properly claimable for the period the plaintiff was out of pocket for that amount).

Finally, the appellant argued that the magistrate was wrong when he adopted the view that the plaintiff was under a positive duty to mitigate its loss. Once more Croft J. agreed. “No such positive duty [to mitigate loss] exists,” he said. However “… the correct application of the law relating to the mitigation of loss in this instance requires that that the award of damages be reduced to the extent that [the plaintiff] has not acted reasonably in claiming the input credits to which it was entitled.”

The lessons from this case? Three occur to me:

  • The financial measure of a defendant’s liability will often vary (plus or minus approximately 10 per cent) depending on the GST status of the particular plaintiff;
  • The “duty to mitigate loss” might be a technical mis-description but that is probably of little practical significance. The broad underlying concept that plaintiffs cannot recover damages for losses they have incurred unreasonably remains alive and well; and
  • If even garbage trucks need to be careful when approaching green lights at intersections the rest of us need to be very cautious indeed.

(Thanks to my friend and colleague Sam Hopper for pointing this case out to me after noticing that one of the authorities cited in it was the matter in which we first met.)

County Court scales up on costs

Are you a County Court litigator charging scale? If so, congratulations; you got a pay rise this week.

Commiserations on the other hand if you a County Court litigant already rueful about rejecting a shrewd offer of compromise. Your burden just got heavier.

The County Court of Victoria has amended its cost rule, Order 63A.

For beneficiaries of scale costs (lawyers and successful litigants especially) this is good news.

There are two key changes.

The first is the axing of the County Court’s own stand-alone scale. Instead, the County Court Civil Procedure Rules now apply the Supreme Court’s scale but discounts it a uniform 20 per cent.

Take, for example, the scale allowances for a solicitor’s time. Under the former County Court scale, a solicitor’s time was allowable at $277 per hour for attending a conference and $546 per half day instructing in Court.

That same solicitor’s time under the new County Court costs regime is now worth $296 per hour (ie 80 per cent of the Supreme Court rate of $370 per hour). As is in the Supreme, costs are now claimable on an hourly basis and also in 6 minute units but the half-day rate for solicitors’ time is gone.

The second key change is the end of ‘party and party costs’. The new default measure of costs is ‘standard basis’ (which is really ‘solicitor and client’ costs by another name). (Indemnity costs remain as the juicer alternative). This change echoes the Supreme Court’s costs reforms of last year (as to which see my blog of the time here).

Some other features of the new County Court costs regime:

  • Costs of pleading amendments (whether with or without leave) are now costs in the proceeding unless the Court otherwise orders (CCR 63A.17);
  • Similarly, costs of interlocutory applications will be costs in the proceeding absent an order to the contrary (CCR 63A 20.1) (Incidentally, this rule has no direct Supreme Court equivalent);
  • Interlocutory costs orders are payable “forthwith” (CCR 63A.03(2)) but unless the Court otherwise orders those costs may not be taxed until the entire proceeding is completed (CCR 63A 20.1). (This is likely to have a glacial effect on the concept of “forthwith”).
  • The entire Order 63A continues to be ostensibly premised on the “County Court scale of costs” as if such a document exists. But it simply doesn’t. Instead CCR 1.13 gives legal force to the mirage by providing, “County Court scale of costs” means a fee, charge or amount that is 80 per cent of the applicable rate set out in Appendix A to Chapter 1 of the Rules of the Supreme Court.”
  • The new rules and costs apply from 7 October 2014 irrespective of when the proceeding involved commenced (CCR 63A.83).

(Thanks to barrister Mark Lapirow for alerting me to the new Order 63A before the ink had even dried on it.)

Is VCAT a court?

Is the Victorian Civil and Administrative Tribunal a court?

According to the Court of Appeal decision this week in Subway Systems Australia v Ireland and Ireland [2014] VSCA 142 the answer depends upon the context of the question.

The case was a bunfight about a sandwich-making franchise. The franchise documents included both retail tenancy provisions and an arbitration agreement.

Relying on the retail tenancy aspect, the franchisee commenced a claim in VCAT. But the franchisor then sought a stay relying on the arbitration agreement.

The franchisor’s stay bid failed in VCAT and again on appeal to a single judge of the Supreme Court (Croft J) but was third time lucky in the Court of Appeal.

It all turned on whether VCAT was a “court” for the purposes of s 8(1) of the Commercial Arbitration Act. That section provides;

A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

Generally VCAT should not be considered a court. Here (from para 96) is part of Kyrou AJA’s explanation:

In my opinion, VCAT could not be characterised as a court under the common law because it is not bound by the rules of evidence; it cannot enforce its own decisions; some of its members are not legally qualified; it can be required to apply a statement of government policy and it can be required to provide advisory opinions. Further, VCAT and its predecessor … were expressly established to be inexpensive, informal and speedy administrative tribunals rather than courts.

Later, Kyrou AJA observed that this common law position is reflected in the Civil Procedure Act 2010, the Interpretation of Legislation Act 1984 and the Constitution Act 1975. His dissenting judgment favoured a consistent approach. “As VCAT has generally not been regarded as a court, if Parliament had intended that it be treated as a court for the purposes of the [Commercial Arbitration] Act, it could easily have said so.”

The majority, Maxwell P and Beach JA disagreed. In separate judgments they concluded that, at least for the purposes of the Commercial Arbitration Act 2011 (Vic), VCAT is a court even if it is considered to be a tribunal (cf court) for other purposes.

In separate judgments each canvassed the policy objectives associated with the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration on which Victoria’s Commercial Arbitration Act is very closely based.

The lesson? Arbitration clauses in private agreements can trump clear statutory conferrals of jurisdiction on VCAT.

More overblown than overarching: Court of Appeal smacks solis with costs orders and disallows fees

The Victorian Court of Appeal last week thumped three large law firms for work which was not “reasonable and proportionate” within the meaning of the Civil Procedure Act 2010.

What’s more, it effectively invited other Victorian courts to do likewise more often.

The case is Yara Australia Pty Ltd v Oswal [2013] VSCA 337.

Expect to hear a lot more about it. It is the first detailed appellate consideration of the Civil Procedure Act obligations on parties and their lawyers.

Many civil litigators will find it confronting reading.

The case

In Yara, three applicants sought leave to appeal against their failure to obtain security for costs. Although they were later able to point to a wider strategic purpose, the amount of security sought between the three of them ostensibly totalled about $141,000, (relatively small beer for the Court of Appeal.)

The applicants had separate but similar interests. Between them, they were represented by solicitors Clayton Utz, Herbert Smith Freehills and K & L Gates, 3 silks and 3 junior counsel.

Their application went down after a single day’s hearing. And worse was to come for the lawyers.

After refusing the application, the Court of Appeal of its own motion invited submissions on the question of whether anyone had breached their overarching obligations under the Civil Procedure Act 2010 in the conduct of the leave to appeal application.

The resulting judgment starts with two factual questions. “First, whether there was any over- representation of a party by counsel, and second, whether the material produced on the hearing of the application for leave to appeal was unnecessary or excessive.”

The Court was ultimately persuaded that the abundance of barristers did not constitute “over-representation” but it was less forgiving about the documentation filed in support of the application.

Why? Because even excluding the notices of appeal and written cases, the application book exceeded 2700 pages and 6 lever arch folders.

In their joint judgment Redlich and Priest JJA and Macaulay AJA were scathing. They variously described parts of it as “entirely otiose”, “not directly relevant”, “excessive”, “superfluous”, “entirely unnecessary” , “repetitious” and containing “a substantial amount of duplicated material”.

The Court concluded by ordering each applicant to pay the respondents’ costs of the application.

Each applicant’s solicitor was then hit with a double whammy. First, each solicitor was ordered to indemnify its client for half of the respondent’s costs “incurred as a consequence of the excessive or unnecessary content of the application books.” Secondly, each applicant’s solicitor was “disallowed recovery from the applicant of 50% of the costs relating to the application books, and costs incidental thereto.”

Some cherries from the judgment

The Court of Appeal is clearly hoping this approach will catch on.

And judges are being invited to act on their own initiative where the parties themselves are bashful.

Here are some extracts from the judgment (citations omitted) to give you its flavour.

5       The statutory regime and the obligations that are imposed by the [Civil Procedure Act] have not previously been considered in any detail at an appellate level. As the enforcement of the overarching obligations under the Act has been so little traversed, there is presently little to guide judicial officers as to the extent of the Court’s powers and the means by which parties or their legal representatives can be penalised for any contravention. We have thus addressed some of these issues at greater length than would ordinarily be necessary when a contravention of the Act is under consideration.

….

14     Each party and their solicitor and counsel have an obligation to comply with the overarching obligation. Whether any of them have breached that overarching obligation is to be determined by an objective evaluation of their conduct having regard to the issues and the amount in dispute in the proceeding. The legal practitioners’ duty is non-delegable. The obligation will override their duty to their client where the discharge of that duty would be inconsistent with the overarching obligation. The legal practitioner will not be relieved of this overarching responsibility because of the instructions of their client.

15     Legal practitioners, whether solicitor or counsel, involved in the preparation of pleadings, affidavits or other materials that are to be used in the proceeding or who provide advice as to such matters, have individual responsibilities to comply with the overarching obligation. Both solicitor and counsel also have an overarching responsibility with respect to the extent and level of their client’s representation. Each must ensure that, having regard to the issues, the extent and level of representation proposed is reasonable and proportionate. Advice or instructions given or received by legal practitioners, and instructions given by the client, may inform but will not be determinative of the question whether, viewed objectively, there has been a breach of the obligation.

         ….

18     Section 29 of the Act provides the Court with broader and more flexible powers than under the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’) or under its inherent jurisdiction. Rule 63.23(1) enables the Court to make orders for costs against a legal practitioner who has caused costs to be incurred improperly by a failure to act with reasonable competence and expedition. However, the primary object of r ? 63.23(1) is not punitive or disciplinary but compensatory, enabling reimbursement of a party’s costs incurred because of the default of the solicitor. The primary object of the Rule is not to punish the solicitor, but to protect the client who has suffered and to indemnify the party who has been injured. Rule 63.23(1) also protects solicitors from the negligence or incompetence of counsel.

20     The Court’s powers under s 29 of the Act include the power to sanction legal practitioners and parties for a contravention of their obligations …. Moreover, the power to sanction is not confined to cases of incompetence or improper conduct by a legal practitioner. Where there is a failure by the practitioner, whether solicitor or counsel, to use reasonable endeavours to comply with the overarching obligations, it will be no answer that the practitioner acted upon the explicit and informed instructions of the client. A sanction may be imposed where, contrary to s 13(3)(b), the legal practitioner acts on the instruction of his or her client in breach of the overarching obligations.

21     …. In our view, the enactment of s 29 together with s 28(2) imbues the Court with broad disciplinary powers that may be reflected in the costs orders that are made. The Court is given a powerful mechanism to exert greater control over the conduct of parties and their legal representatives, and thus over the process of civil litigation and the use of its own limited resources.

22     The Act does not merely reaffirm the existing inherent powers of the court but provides a powerful indication of the will of the Parliament about the values sought to be achieved by the way in which cases are managed in the courts and the balances that have to be struck….

23     It is therefore somewhat surprising that despite the length of time the Act has been in force, the scope of the sanction provisions in the Act for a failure to comply with the overarching obligations has been under-utilised.

….

25     The explanation for the under-utilisation of the provisions of the Act lies in part in a false perception that these provisions and the overarching obligations do not effect any material change to the Rules and the inherent jurisdiction of the Court…. The Act creates obligations which extend beyond those in the Rules and confers upon the courts a panoply of powers not found in the Rules.

26     The Act prescribes that parties to a civil proceeding are under a strict, positive duty to ensure that they comply with each of the overarching obligations and the court is obliged to enforce these duties. The statutory sanctions provide a valuable tool for improving case management, reducing waste and delay and enhancing the accessibility and proportionality of civil litigation. Judicial officers must actively hold the parties to account.

27     Yet as we have observed, sanctions imposed for a breach of any overarching provisions have been a rarity at first instance. When no party invites the court to determine whether there has been a breach of the Act, there may be a judicial disinclination to embark upon such an own-motion inquiry for fear that inquiry as to a potential breach may be time consuming and may require the introduction of material that was not before the court as part of the proceeding. Such fears cannot relieve judges of their responsibilities….

You can probably still hear this judgment causing a hush in mega-firms the length of Collins Street (starting with their photocopying departments).