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Cost Disclosure and Informed Consent – Does Your Client Really Understand? A Victorian Perspective

The Legal Costing Company Sydney - Pattison Hardman

Meaningful Disclosure -Section 174(3) – A Victorian Perspective

In my previous article I examined the Judgment of Walton J in Malvina Park Pty Ltd v Johnson [2019] NSWSC 1490 wherein the plaintiff unsuccessfully sought to rely on Frigger v Madgwicks, [2018] VSC 281

The below examines Frigger and highlights the difference of interpretation being applied between New South Wales and Victoria.

The Friggers were experienced litigators.  They also acted as self-represented litigants, as was the case in the two Federal Court proceedings the subject of the instructions given to the respondent in this matter.

They approached Madgwicks for advice, to redraft a statement of claim and for representation in two Federal Court proceedings they had commenced against various defendants.

The proceedings concerned allegations of fraud and insolvency issues arising from several long-running Supreme Court of Western Australia proceedings.

Following a number of discussions as to the scope of the instructions and the work required, Madgwicks provided a cost agreement and disclosure for the Friggers to sign and return.

The retainer ultimately lasted for less than a month before being terminated by the Friggers.

Ultimately, following proceedings in the Magistrate and District Courts for the recovery of outstanding fees, the Friggers filed a summons for taxation seeking a review of all costs, both paid and unpaid.

The Notice of Objections filed included a general objection that the costs agreement was void pursuant to section 178(1)(a) of the Legal Profession Uniform Law (“the Act”) due to alleged failures to make the costs disclosures required by sections 174 (1), (3) and 175 of the Act.  It also included specific objections to each line item in the bills of costs

As the retainer was to conduct two Federal Court proceedings, it was found that prima facie, the Federal Court scale of costs would seem to be a fair and reasonable basis of charge if the costs agreement was voided.

The Friggars were warned that this might lead to an increase in costs, owing to the modest hourly rates charged by Madgwicks, yet chose to press on with their application.

The objection on the 174(3) point as framed was that the law practice had undertaken some work under the agreed course of action on the matter, being the agreed scope of instructions.  But undertook other work that did not fall under the agreed scope and in the circumstances, the respondent had therefore failed to satisfy itself that the applicants had understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs, contrary to s 174(3) of the Act.

The Friggers position was that the only work that Madgwicks were instructed to undertake was to amend the statement of claim as directed by Mrs Frigger.  The work undertaken which was outside ‘the proposed course of action’ was the investigation of the prior judgements involving the Friggers, preparation of the solicitors’ working notes and investigations as to whether the facts alleged in the Statement of Claim were justified on the basis of these judgements.

Mrs Frigger submitted that the solicitors should have relied on the material given by her in her email correspondence only and not should not have sought to obtain information outside this material.

The Judicial Registrar of the Costs Court in Victoria, Gourlay JR gave this argument short shrift, finding at [25]

In my view the submission is nonsense. The solicitors were retained due to their expertise in similar matters. A lawyer has a duty to exercise professional skills and judgement in acting for their client.  They were instructed to act in the matters and required to enter appearances in each matter with the Court, advise the defendants’ solicitors of their instructions to act and to act in a reasonable manner to ensure that any amended pleading included all the relevant facts and law.  Although the Friggers are very experienced litigants they are not legally qualified and the need to amend the pleadings to plead a cause of action – relying on the same facts already pleaded – pursuant to contraventions of Part 5.3A Corporations Act and relief pursuant to s 1324 Corporations Act does not limit the respondent to have regard to only the documents briefed to them due to their obligations to the Court.  Had the respondent failed to take reasonable steps to understand the complicated pleading and that the factual allegations made were relevant to the cause of action to be pleaded they could have been subject to allegations of negligence.  During the course of the cross-examination it was clear that the solicitors had read documents on the Federal Court files that had not been given to them as well as several (but not all) decisions of the Western Australian Courts.  The respondent was at all times required to exercise its independent judgment of whether or not the intended amendments were valid and able to sustain the cause of action to be pleaded.

However, interestingly she continues at [28] finding

“Section 174(3) does not impose a disclosure obligation on the law practice.  Rather the section requires the respondent to be satisfied that the client understood proposed course of action for the conduct of the matter and the proposed costs.  On signing and returning the acceptance of the costs agreement it was reasonable for the respondent to be so satisfied..”.

The Friggers had each signed and returned the costs agreement acknowledging that they have read and understood the agreement and costs disclosures and as such, Gourlay JR found that  In the light of their obvious sophistication and experience as litigators this acknowledgement should be accepted at face value.

But went further finding at [43]

…Section 174(3) does not require disclosure and cannot result in the costs agreement being void even if a finding was made that the solicitor was not satisfied that the client understood the course of action proposed.  Section 178(1)(a) states that the costs agreement is void if it contravenes the disclosure obligations in part 4.3 of the Act.  No finding has been made that there was such a contravention.

Walton J in the previously discussed matter of Malvina Park Pty Ltd v Johnson [2019] NSWSC 1490 departed from Gourlay JR at [89] where he found that:

It follows from the totality of these conclusions, I would, with respect, not follow the judgment of Gourlay JR in Frigger at [28] and [43], although it may be noted, that it would not appear that there was full argument in that matter and Gourlay JR appeared to rule (at [28]) that the client had understood and consented..

Whilst we are of the view that Walton J correctly determined that question and that s174(3) sits within a law practices disclosure requirements, the Frigger decision can add an element of confusion yet no comfort to a NSW practitioner.

The takeaway is: get your disclosure right, explain it clearly to your clients (with contemporaneous attendance notes), confirm in writing that your client understood and invite them to contact you with any queries they may have or clarification they may require.