Legal Profession Uniform Law The New Costs

by Kellie Woods, Managing Associate, Dentons Australia

The introduction of the Legal Profession Uniform Law Application Act 2022 (WA)1 in Western Australia harmonises the regulation of the legal profession and legal practice in New South Wales, Victoria and Western Australia allowing for consistency between those jurisdictions.2 That harmonisation is particularly advantageous to practitioners or law practices that provide services across multiple jurisdictions.

The LPAA incorporates the Legal Profession Uniform Law3 (LPUL) and provides a new regulatory framework in Western Australia for, amongst other things:

(a) costs disclosure;4

(b) the assessment of legal costs by a

Registrar of the Supreme Court of

Western Australia, being a “costs assessor” (as defined in the LPAA), on a solicitor and client basis;5 and

(c) the resolution of some legal costs disputes by the Legal Practice Board (LPB), being the designated local regulatory authority.6

The objectives of the legal costs provisions of the LPUL are to ensure that clients can make informed choices, prevent law practices from charging more than what is fair and reasonable and to provide a framework for costs assessments. 7

Solicitor and Client Costs Assessments

Under the LPUL a client, third party payer8, a law practice or another law practice where that other law practice is liable for the law practice provider’s legal costs (Applicant) can apply for a costs assessment of the whole or part of legal costs charged by a law practice.9

A “third party payer” can be an associated third party payer or a non-associated third party payer. An associated third party payer is not a client of the law practice but is a third party under a legal obligation owed to the law practice to pay the legal fees. A non-associated third party payer is not a client of the law practice but is under a legal obligation owed to the client or another person to pay the law practice’s bills and that obligation is not owed to the law practice.10

The Applicant can only apply for a costs assessment under the LPUL if the legal costs are the subject of a costs dispute under Chapter 5 of the LPUL, if the LPB:

(a) is unable to resolve the dispute (provided the dispute is within the scope of its authority); and (b) has notified the parties that they are now entitled to apply for a costs assessment.11

Any application to the Supreme Court by the Applicant for a costs assessment under the LPUL must be made within 12 months:

(a) from when the law practice gives the bill to the client, third party payer or other law practice, or the request for payment of legal fees was made to the client, third party payer or other law practice; or (b) from when legal costs were paid by the client, third party payer or other law practice, if the law practice neither issues a bill or makes a request for the payment of its legal costs.12

However, the Supreme Court has the jurisdiction to extend the time for the client or third party payer to make application for costs assessment if fair and just for the application to be dealt with outside of time.13 In considering what is “fair and just” the Court will consider the following factors:

(a) the length of the client or third party payer’s delay and the prejudice to the law practice in allowing an extension of time;14

(b) the reasons for the delay;15

(c) the client or third party payer’s knowledge of the right to seek a costs assessment. However, this is unlikely to be a significant factor because the legal costs disclosure regime under the LPUL requires law practices to notify clients and third party payers about those rights;16

(d) any evidence suggesting that legal costs charged might be excessive, which is an important factor to be weighed in balance, but is not decisive;17 and

(e) the law practice’s reasons for opposing an application for an extension of time.18

The Supreme Court of Western Australia Consolidated Practice Directions have been updated to reflect the new regime for an application for a costs assessments under the LPUL.19

If the first instructions given to a law practice by the client or other law practice occur on or after 1 July 2022 then either:20

(a) the LPB can deal with a costs dispute in accordance with Chapter 5 of the

LPUL (as below referred to); or

(b) an application can be made to the

Court for a costs assessment under the LPUL.

In practice, the Supreme Court process in applying for a costs assessment under the LPUL is largely the same as the previous costs assessment process under the Legal Profession Act 2008 (WA), including the requirement that the Applicant confer with the other party to the costs assessment proceedings before the commencement of the proceedings21 and the Court’s assessment about whether the matter is suitable for a provisional costs assessment.

The principles applicable to conferral under Order 59, Rule 9 of the Rules of the Supreme Court equally apply to an application for an assessment of costs and the requirement for parties to meaningfully confer (including verbally) is a fundamental component of the principles of modern case management in the Supreme Court.22

If the parties fail to confer before making an application for a costs assessment, the Applicant risks the Court making an adverse costs Order against the Applicant.23

In any assessment of costs the Registrar will:

(a) not necessarily conduct a line-by-line item assessment of the Bill filed in the costs assessment proceedings and the assessment of costs process is not considered to follow the same rigorous process as a taxation of costs;24 and

(b) will assess whether the legal costs charged by the law practice are “fair and reasonable”.25

What are fair and reasonable legal costs?

Whilst the concept of what is “fair and reasonable” is not new,26 the formal introduction by the LPUL of the concepts of “proportionately and reasonably incurred” and “proportionate and reasonable in amount”27 in the assessment of whether legal costs charged are “fair and reasonable” are new. In assessing whether legal costs are “fair and reasonable” the factors the Registrar is to take into account are set out in section 172(2) of the LPUL. However, other than section 172 of the LPUL, the LPUL does not provide any guidance of what is meant by the terms “fair and reasonable” or “proportionate and reasonable”.

The Macquarie Dictionary28 defines “reasonable” as: “agreeable to reason or sound judgement” and “proportionate” as: “proportioned; being in due proportion; proportional”.

In Lissenden v Dellios [2021] VSC 520 the Supreme Court of Victoria stated that:

(a) “fairness and reasonableness are discrete concepts, with fairness relating to the method of obtaining the agreement and reasonableness relating to quantum”: [30]; (b) “an assessment of proportionality is not a mere mathematical exercise and requires an examination of the surrounding circumstances”: [33]; and (c) “the power of the Court to deal with the plaintiff’s legal costs arises [in that] proceeding from the Court’s inherent jurisdiction to do justice by parties to litigation by ensuring that solicitors, as officers of the Court, are remunerated properly, but no more, for their work as solicitors. This inherent jurisdiction to supervise and regulate the costs of solicitors arises independently of a complaint”: [47].

In Newstart 123 Pty Ltd v Billabong International Ltd [2016] FCA 1194 the Federal Court stated that: “Proportionality looks to the expected realistic return at the time the work being charged for was performed, not the known return at a time remote from when the work was performed; at the later time, circumstances may have changed to alter the calculus, but that would not deny that the work performed and its cost was proportionate at the time it was performed. Perhaps the costs claimed can be compared with the known return, but such a comparison ought not to be confused with a true proportionality analysis.”: [45].

And in Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666 the Supreme Court of Victoria stated that:

(a) “to determine whether costs are reasonable, it is critical to review the file and examine the work product referable to the fees charged.”: [655];

(b) the assessor ought have regard to contemporaneous records, including print outs from the law practice’s accounting system: [662]; and (c) in charging costs solicitors have a strict, positive obligation to ensure that legal costs are properly incurred, reasonable and proportionate: [1526].

Based on that recent case law, it appears that a Registrar’s assessment in any costs assessment under the LPUL of what legal costs charged by a law practice are:

(a) “reasonable” is an objective test having regard to subjective means based on the Registrar’s opinion or perspective; and

(b) “proportionate” and must look to whether the amount of legal fees charged are proportionate having regard to the work completed at the relevant time and taking into account such things as the quantum of any dispute the subject of litigation, the complexity of the matter or the work completed and the importance of the issues to the parties to the proceedings and not the outcome of the work.29

In any costs assessment under the LPUL, the Registrar has a discretion to make a costs Order either for or against the Applicant in the proceedings. Further, if the law practice has failed to give proper disclosure to a client or the law practice’s legal costs claimed are reduced by 15% or more that failure can result in the law practice not receiving its costs of the costs assessment. 30

In addition to the risk of an unfavourable costs Order or the law practice not receiving a costs Order in its favour, the other potential consequence of a costs assessment and the reduction of the amounts claimed from the “payer”, includes a referral by the Registrar to the LPB for disciplinary action against the billing practitioner under section 202 of the LPUL.

To reduce those risks practitioners or the law practice should obtain impartial independent advice about the costs assessment process and the legal costs charged.

Costs Disputes under the LPUL

The LPUL introduces the concept of: “costs disputes” which are a “consumer matter” and the power for the LPB to assist in resolution of a “costs dispute” and to make a binding costs determination on the parties.

The LPB can assist parties in attempting to resolve costs disputes under the LPUL provided that:

(a) in the opinion of the LPB, the parties have made a reasonable attempt to resolve the costs dispute that

has been unsuccessful or it would be unreasonable to expect the complainant to be involved in the attempt to resolve the dispute;31 and

(b) the total bill for legal costs is less than $100,000 (indexed); or 32

(c) the total bill for legal costs equals or is more than $100,000 (indexed) payable in respect of any one matter, but the total amount in dispute is less than $10,000 (indexed). 33

However, the LPB only has the power to make a binding determination about a “costs dispute” where the total legal costs in dispute are less than $10,000 (indexed).

A client, third party payer or law practice must make any complaint to the LPB within 60 days after the legal costs become payable or where an itemised bill has been requested within 30 days of the law practice providing the itemised bill.34

The LPB can also grant the client, third party payer or law practice an additional 4 month extension of time to make a “costs dispute” if suitable reasons are provided by the client, third party payer or law practice provided it is just and fair to do so having regard to the reasons for the delay.35

The LPB’s assistance to resolve a “costs dispute” must be an “attempt to resolve a consumer matter by informal means” and the LPB can require the parties to attend at a mediation “in good faith”.36 In addition the LPB’s powers extend to documenting settlement agreements which after filing with a court can be enforced as an Order of the Court.37

Key Tips

The introduction of the LPUL is clearly aimed at consumer protection and ensuring that clients are aware of their legal rights. It imposes substantial obligations on lawyers to ensure compliance with the costs disclosure regimes and that lawyers are “remunerated properly, but no more”. There is no doubt that issues will arise with the meaning and interpretation of various sections of the LPUL in relation to the costs dispute, costs assessment and costs dispute regime which will cause divergence of opinion amongst the profession.

However, to reduce the risk of costs assessments, cost disputes and the reductions of fees in the costs assessment and costs dispute process, some helpful tips include ensuring: and costs agreement sections of the LPUL;

(b) that legal work is properly billable and properly recorded, which includes making time entries detailed, clear and concise; and

(c) that contemporaneous records of work completed are available and on the client files, beyond the “time sheet” record.

It is always recommended that practitioners obtain independent and impartial legal advice about the costs assessment process, whether costs are “fair and reasonable” and the extent to which legal costs charged to a client are recoverable.

Kellie Woods is a Managing Associate at Dentons Australia. E: kellie.woods@dentons.com P:(08) 9323 0907

End Notes

1 LPAA. 2 Section 6 of the LPAA defines the Legal Profession

Uniform Law as the Legal Profession Uniform Law as set out in the Legal Profession Uniform Law Application

Act 2014 (Vic), Schedule 1 (LPUL). 3 LPUL, section 3. 4 LPUL, Chapter 4, Part 4.3, Division 3. 5 LPUL, Chapter 4, Part 4.3, Division 7. The Taxing

Officer of the Supreme Court is defined as a “costs assessor”: LPUL, section 19 of the LPAA. 6 LPUL, Chapter 5, Part 5.3. The designated local regulatory authority is Legal Practice Board, section 20 LPAA. 7 LPUL, section 169. 8 Section 171 of the LPUL provides the definition of a

“third party payer”. 9 LPUL, section 198. 10 LPUL, section 171. To determine whether a third party payer is liable for the law practice’s bills the identity of the third party payer and the legal obligations giving rise to the obligation of the third party to pay the law practice’s bills should be identified in pre-engagement meetings. 11 Chapter 5 of the LPUL gives the Legal Practice Board authority to assist with costs disputes. The threshold for the designated regulatory authority is to assist with the resolution of a dispute by informal means or Mediation and where the total legal costs are up to $100,000 (indexed) and the LPB has authority to make a binding determination about the amount of costs payable if the costs in dispute are less than $10,000 (indexed): LPUL section 292. A pre-condition for the exercise of the LPB’s power is that at least one of the parties having made a reasonable attempt to resolve the dispute. 12 LPUL, section 198(3). 13 LPUL, section 198(4). Note that section 198(4) does not allow a law practice or a commercial or government client to apply for an extension of time. 14 Monopak Pty Ltd v Maxim Litigation Consultants [2007]

WASC 112; Tomasevic v Carbone [2015] VSC 302. 15 Frigger v Murfett Legal Pty Ltd [2012] WASC 447;

Tomasevic v Carbone [2015] VSC 302. 16 LPUL, 174(2). 17 Lewis Blyth and Hooper v Dennis [2007] WASC 177 18 Frigger v Murfett Legal Pty Ltd [2012] WASC 447. 19 https://www.supremecourt.wa.gov.au/_files/

Consolidated_Practice_Directions.pdf, 4.7.4. 20 https://www.supremecourt.wa.gov.au/_files/

Consolidated_Practice_Directions.pdf, 4.7.4. 21 Supreme Court Consolidated Practice Directions, 4.3.2. 22 Insurance Commission of Western Australia -v- Antony

Leslie John Woodings as Liquidator Of The Bell Group

Ltd (In Liq) [No 3] [2018] WASC 44 (S), [11]. Youlden

Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161. 23 Buywick.com Ltd v Foxgold Pty Ltd [2000] WASC 216, [26]. 24 LM -v- K Lawyers [2015] WASC 244, [27]. 25 Section 301 of the Legal Profession Act 2008 (WA); section 172 of the LPUL. 26 Section 301 of the Legal Profession Act 2008 (WA). 27 LPUL, section 172. 28 https://www.macquariedictionary.com.au/features/ word/search/?search_word_type=Dictionary&word 29 Kennedy v Schwarcz (as Executors of the Will of Jabe, (dec’d)) [2021] VSC 106. 30 LPUL, section 204 31 LPUL, section 286 32 LPUL, section 291 33 LPUL, section 291 34 https://www.supremecourt.wa.gov.au/_files/

Consolidated_Practice_Directions.pdf, 4.7.4 35 LPUL, 272(3) and https://www.supremecourt.wa.gov. au/_files/Consolidated_Practice_Directions.pdf, 4.7.2 36 LPUL, sections 287 and 288. 37 LPUL, 289.