Formation of costs agreement queried

The Kingaroy Magistrates Court recently dismissed an application by an Incorporated Legal Practice (“ILP”) for summary judgment against a former client and/or that the client’s defence be struck out.¹

The Director of the ILP provided an affidavit advising that two costs disclosures (District Court Property Matter and Family Law Parenting, Property and Spousal Maintenance Matter) had been made to the client. The Court noted that Clause 8 of the documents read:

8. Acknowledgement

I acknowledge that I have read and understood the contents of this disclosure notice.

The documents were titled “Disclosure Notice”. The Court noted that ‘the document is not headed agreement and is not a costs agreement as described in the Legal Profession Act 2007 (LPA)’.²

Subsections 322(3)-(4) of the LPA relevantly provide:

(3) The costs agreement may consist of a written offer under subsection (4) that is accepted in writing or by other conduct.

(4) The offer must clearly state—

(a) that it is an offer to enter into a costs agreement; and

(b) that the offer can be accepted in writing or by other conduct; and

(c) the type of conduct that will constitute acceptance.

Each of the documents provided by the ILP to the client did not state that it was an offer to enter into a costs agreement nor did it state how the offer could be accepted.

The court noted that a disclosure notice and a costs agreement are two separate things.³ Magistrate Sinclair found that there was no written agreement giving a contractual right to a debt or damages for breach of contract.⁴

The Court also considered whether there had been disclosure as required by s 308 LPA. The Court noted that in both documents provided to the client there was no explanation of the variables or the range of services to be provided beyond the headings or the estimates.

Subsections 308(4)(c), (f) of the LPA require:

(c) an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs; and

…

(f) if the matter is a litigious matter, an estimate of –

(i) the range of costs that may be recovered if the client is successful in the litigation; and

(ii) the range of costs the client may be ordered to pay if the client is unsuccessful.

The documents did provide:

7. Costs in court proceedings

(a) if court proceedings are taken on your behalf:

(i) The court may order that you pay another party’s costs. E.g. if you lose the case;

(ii) The court may order the other party to pay your costs of the proceedings and, as a general rule, this will not be the whole of the legal costs you are liable to pay us; and

(iii) If the court orders you to pay costs, the court ordered costs are payable by you to the other party in addition to the costs liable to be paid pursuant to the proposed CSA.

(b) If settlement of your claim is being resolved by alternative dispute resolution prior to any agreement resolving the matter this firm will provide you with a reasonable estimate of its costs payable by you on settlement, a reasonable estimate of the costs you would obtain from the other party on settlement if the settlement is favourable to you, or a reasonable estimate of the costs you may have to pay the other party.

Magistrate Sinclair found that these documents did not comply with the obligations in s 308(4) LPA as they failed to provide a possible quantum of costs for or against the client either by describing the types, categories, percentages or estimated amounts. Magistrate Sinclair further considered that the legal practitioner had failed to comply with the obligation to provide ongoing disclosure under s 315 LPA.

Magistrate Sinclair considered the effect of s 316 LPA and stated that not only does the client have a statutory right to not pay the ILP’s costs until they have been assessed, but also that there is a statutory bar to the ILP continuing the action.⁵

The Magistrate considered the bill/invoice provided to the client and noted:

• the Form 2 Notification of Client’s Rights was not part of the exhibit to the affidavit and was not mentioned in the covering letter or bill;
• that the invoice did not meet the requirements of a “tax Invoice” as it did not include the amount of GST payable, nor was it titled “Tax Invoice”, despite the Director referring to it as such in his affidavit; and
• the demand for payment is described as a “fixed cost” despite there being no fixed cost costs disclosure or cost agreement.

Magistrate Sinclair considered whether the bill might be a lump sum bill in circumstances where it (and the covering letter) included no description of the legal services provided.⁶ The Magistrate considered the issue of whether the bill/invoice was a bill under s 330 LPA was a matter for trial, although he expressed the view that it did not appear to be a bill under s 330 LPA and he noted that ‘the lack of a proper bill is expressed to result in the inability to even file the action’.⁷

Despite the Court’s findings that the ILP could not either commence or maintain the action, the alternate application to strike out the defence was also considered.

The defendant was self-represented and the defence documents filed by her were handwritten. The Magistrate accepted that the customary practice of legal practitioners to carefully admit, deny or not admit each and every allegation was sensible practice, but the pleadings did not need to use specific words or phrases to make an effective denial.

The Magistrate dismissed both the application for summary judgment and the application to strike out the defence.

The Queensland Law Society has a Cost Disclosure Checklist available for practitioners to ensure they are meeting their disclosure obligations under s 308 LPA (and s 123 LPA for ILPs).

For matters where the fees will not exceed the $3000 threshold, practitioners might consider whether the Abbreviated Disclosure Notice and Engagement Agreement is suitable for the particular legal work to be conducted.

QLS Members are eligible for complimentary and confidential Practice Advisory Service visits; and, where necessary, may be referred to a Costs Advisory Panel member for up to 2 hours of guidance and assistance contact ethics@qls.com.au or 07 3842 5843 to make a booking.

Judy Hayward is Legal Practice Director at the Queensland Law Society Ethics and Practice Centre. Sarah Millar is a law clerk at the centre.

Footnotes
¹ Murray Laws Pty Ltd v Josephine Lucille Reeves [2024] QMC 20.
² Ibid [21].
³ Ibid [24].
⁴ Ibid [26] (emphasis added). It was noted at [27] that it had not been pleaded that there was any oral (or partly oral) contract.
⁵ Ibid [47]-[51]; s 316(2) of the Legal Profession Act 2007 (Qld) prohibits the ILP from maintaining proceedings against the client unless the costs have been assessed.
⁶ Legal Profession Act 2007 (Qld) s 300 defines “lump sum bill” to mean a bill that describes the legal services to which it relates and specifies the total amount of the legal costs.
⁷ S 329 LPA and see [83] – [84].