Non-Disclosure Conduct by a Barrister Vitiating Fee Agreement did not Render Fees Unconditionally Payable by Briefing Solicitor

In Bingham v Bevan [2023] NSWCA 86 (5 May 2023) upon the proper construction of the Legal Profession Uniform Law (NSW) (“NSW Act”), found the vitiation of a fee agreement entered into by a New South Wales barrister with a solicitor – so vitiated on account of proven non-disclosure by the barrister, in keeping the estimate up to date – did not preclude the solicitor relying upon the conditional fee payment provision in such agreement as a moratorium on payment.

The Legal Profession Act 2007 (Qld) contains provisions analogous to most of those in the NSW Act under consideration in that case, namely:

319  On what basis are legal costs recoverable

(1) Subject to division 2, legal costs are recoverable—

(a) under a costs agreement made under division 5 or the corresponding provisions of a corresponding law; or

(b) if paragraph (a) does not apply—under the applicable scale of costs; or

(c) if neither paragraph (a) nor (b) applies—according to the fair and reasonable value of the legal services provided.

Note for paragraph (c)—

See section 341(2) for the criteria that are to be applied on a costs assessment to decide whether legal costs are fair and reasonable.

(2) Subsection (1) does not apply in relation to the recovery of legal costs for work by a barrister retained, before the relevant day, to perform that work.

(3) In this section—

relevant day means the day that is 6 months after the day of commencement of this section.

…

322  Making costs agreements

(1) A costs agreement may be made between—

(a) a client and a law practice retained by the client; or

(b) a client and a law practice retained on behalf of the client by another law practice; or

(c) a law practice and another law practice that retained that law practice on behalf of a client; or

(d) a law practice and an associated third party payer.

(2) The costs agreement must be written or evidenced in writing.

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

Note—

Acceptance by other conduct is not permitted for conditional costs agreements—see section 323(3)(c)(i).

(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.

(5) Except as provided by section 344, a costs agreement can not provide that the legal costs to which it relates are not subject to costs assessment under division 7.

Note—

Under section 327(1), if a costs agreement attempts to provide that the legal costs are not subject to a costs assessment, the costs agreement will be void.

(6) A reference in section 328, or in a provision of this part prescribed under a regulation, to a client is, in relation to a costs agreement that is entered into between a law practice and an associated third party payer as mentioned in subsection (1)(d) and to which a client of the law practice is not a party, a reference to the associated third party payer.

…

326  Effect of costs agreement

Subject to this division and division 7, a costs agreement may be enforced in the same way as any other contract.

327  Particular costs agreements are void

(1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this division is void.

(2) Subject to this section and division 7, legal costs under a void costs agreement are recoverable as set out in section 319(1)(b) or (c).

(3) However, a law practice is not entitled to recover, as set out in section 319(1)(b) or (c), any amount in excess of the amount the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received.

(4) A law practice that has entered into a costs agreement in contravention of section 324 is not entitled to recover the whole or any part of the uplift fee and must repay the amount received in relation to the uplift fee to the person from whom it was received.

(5) A law practice that has entered into a costs agreement in contravention of section 325 is not entitled to recover any amount relating to the provision of legal services in the matter to which the costs agreement related and must repay any amount received relating to those services to the person from whom it was received.

(6) If a law practice does not repay an amount required by subsection (3), (4) or (5) to be repaid, the person entitled to be repaid may recover the amount from the law practice as a debt in a court of competent jurisdiction.

(emphasis added)

The NSW Court of Appeal wrote (by Basten AJA, White JA and Meagher JA agreeing):

[3]  In February 2019, the respondent, Christopher John Bevan, was briefed by the appellant, John David Bingham, to appear for a client of Mr Bingham in proceedings in the High Court of Australia. It is convenient to refer to Mr Bevan as “the Barrister” and Mr Bingham as “the Solicitor”.

[4]  The Barrister entered into a costs agreement with the Solicitor pursuant to which the Solicitor was responsible for payment of the Barrister’s fees. The agreement was said to be entered into pursuant to s 180(1)(c) of the Legal Profession Uniform Law (NSW) (“Uniform Law”). Clause 4 of the agreement, provided that the Solicitor’s liability for payment of fees under the agreement be conditional upon him first recovering the fees either from the client or from the respondent to the proposed appeal.

[5]  The costs agreement included disclosures, purportedly in accordance with s 175(2) of the Uniform Law, with respect to the basis upon which the Barrister would charge for his services, and an estimate of the total fees payable.

[6]  The estimated costs were substantially below (indeed, a small percentage of) the invoices later rendered. The significant change in claimed entitlement was not disclosed to the Solicitor until an invoice was rendered, eight days before the hearing of the appeal in the High Court. The costs assessor held that the Barrister was in contravention of his disclosure obligations in Pt 4.3, Div 3 of the Uniform Law. Section 178(1)(a) of the Uniform Law stated that in such circumstances, “the costs agreement concerned (if any) is void”.

[7]  Perhaps surprisingly, the Barrister’s position was that, because the costs agreement was, as a result of his own contravention of his statutory obligations, “void”, the condition in cl 4 that the Solicitor was not required to pay the fees if he had not obtained money from the client (or the other party) fell away, so that the full amount of costs assessed (on a solicitor and client basis) became payable forthwith. That submission was accepted by the primary judge. The issue on the appeal is whether the Barrister’s claim was correct.

Procedural background

[8]  The Barrister provided the Solicitor with three separate costs agreements. These were identical except with respect to cl 3 which set out the estimates of fees.

[9]  The first agreement was dated 2 February 2019 and included the following cost estimates:

3. The Barrister estimates total fees for the Brief at $63,000‐$75,000 plus GST for the three stages of the likely conduct of the proceedings the subject of the Brief, made up as follows:

(a) the application for special leave to appeal — $24,000–$27,000 plus GST;

(b) any application for security for the costs of the appeal — $9,000–$12,000 plus GST;

(c) the conduct of the appeal in Canberra and the preparation of all written submissions, chronology, aides memoire and advising on the preparation of the Appeal Books — $30,000–$36,000 plus GST.

[10]  Importantly for present purposes, cl 4 stated:

4. The Solicitor’s liability for the payment of fees under this agreement is conditional upon him recovering the Barrister’s fees from either the client or the respondent to the appeal, Scott Darren Pascoe, to the intent that the Solicitor will only be liable for the Barrister’s fees under this agreement to the extent that one or more of those parties has put him into the necessary funds to pay the Barrister’s fees. However, liability to pay the Barrister’s fees is not otherwise dependent upon the success of the proceedings which is the subject of this costs agreement.

[11]  The Solicitor was obliged to take reasonable steps to obtain the requisite funds:

7. Subject to paragraph 4 above, the Solicitor’s obligations under this agreement are personal to him. The Solicitor is liable to the Barrister for his fees rather than the Client being liable. The Solicitor will use his best endeavours at his expense to recover the Barrister’s fees from either the Client or the respondent to the appeal, Scott Darren Pascoe, expeditiously, irrespective of the outcome of the proceedings which are the subject of this costs agreement and the Brief.

Before the primary judge, the Barrister argued that the protection accorded the Solicitor under cl 4 was contingent upon his satisfying his obligation under cl 7. That argument was rejected and the rejection was not challenged on the appeal. Clause 7 may therefore be put to one side.

[12]  On 6 February 2019, the Barrister provided a second costs agreement. The only relevant change was in cl 3 which varied the estimate of total fees and the fees for the three stages as follows:

3. The Barrister estimates his total fees for the Brief at $60,000 plus GST plus travelling and out‐of‐pocket expenses for the three likely stages of the proceedings, made up as follows:

(a) the application for special leave to appeal — $15,000 plus GST;

(b) any application for security for the costs of the appeal — $9,000 plus GST;

(c) the conduct of the appeal in Canberra and the preparation of all written submissions, chronology, aides memoire and advising on the preparation of the Appeal Books — $36,000 plus GST plus travelling and out‐of‐pocket expenses.

[13]  Three observations may be made in relation to this (second) costs agreement. First, because it followed so closely on the heels of the first agreement, it may be assumed that the second superseded the first. Secondly, item (b) (referring to a security for costs application) may be disregarded: no such application was made, nor was likely to be made. Thirdly, the first stage (the application for special leave) was significantly reduced from the estimate made four days earlier, to an amount of $15,000. That figure was curious because, as revealed in the Barrister’s first invoice dated 3 October 2019, an amount was later claimed for work undertaken prior to 6 February 2019 totalling $26,400 (plus GST).

[14]  The special leave application was heard on 21 June 2019, the High Court granting special leave to appeal:

[15]  On 3 October 2019, the Barrister issued an invoice in the sum of $291,066.60. On the same day, he provided a third costs agreement to the Solicitor. Again, the terms of the agreement were the same as in the previous agreements, except for cl 3 which now read as follows:

3. The Barrister estimates his total fees and out‐of‐pockets for the completion of the Brief incurred from tomorrow, 4 October 2019, to Saturday, 12 October 2019 at $31,000 plus GST (including out‐of‐pocket expenses in Canberra for the appeal hearing), made up as follows:

(a) preparation for hearing of the appeal (October 4, 8, 9 and 10) — $24,000 plus GST;

(b) hearing of the appeal (October 11) — $6,000 plus GST;

(c) accommodation, travelling and out‐of‐pocket expenses for 3 days travelling to and from Canberra and the stay in Canberra (October 10, 11 and 12) — $1,000 plus GST.

[16]  An email to the Solicitor on 3 October 2019 noted: “[t]he amount invoiced well and truly exceeds my original estimate from last February”, providing two reasons which purported to explain the changed circumstances. The fresh costs disclosure in cl 3, however, applied only with respect to the period from 4 October to 12 October 2019 (which included the hearing of the appeal on October 11). The total amount was $31,000 (plus GST) which was a reduction of the amount for stage 3 in the second bill (namely $36,000 plus GST) but covered a more limited part of the work in stage 3 (excluding, for example, the preparation of written submissions).

[17]  On 13 December 2019 (two months after the hearing of the appeal), the High Court delivered judgment dismissing the appeal with costs. That event removed one possible source of funds from which the Barrister might have been paid, namely an adverse costs order against the respondent to the appeal (Mr Pascoe).

[18]  The Barrister stated  that, on 29 July 2020, he lodged with the Manager, Costs Assessment an application for assessment of costs, although the certificate of determination identified the bill as having been submitted for assessment on 2 November 2020.

[19]  On 12 February 2021, a certificate issued by the costs assessor was sent by the Manager, Costs Assessment to the parties, together with a copy of the assessor’s reasons dated 9 December 2020. The certificate identified the amount of the costs as $310,375.39. With interest and filing fee, the total amount specified in the certificate was $323,715.10. (Aspects of the costs assessment process, which are tangentially relevant to the issues before this Court, will be noted below.)

[20]  On 15 February 2021, the Barrister filed an application to register the certificate of determination as a judgment of the Court under Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 36.10. The application was accompanied by an affidavit sworn by the Barrister stating:

None of the costs specified in the attached certificate have been paid.

[21]  An order for payment of the full amount in the certificate was made and entered on 19 February 2021. There is no requirement in the UCPR for prior notice of the proposed judgment or order to be given to any affected party, nor for a copy of the judgment or order to be served. It appears that the Solicitor became aware of the registration of the judgment on 17 March 2021 when advised by a solicitor acting for another client of the Solicitor that solicitor had received a letter from the Barrister enclosing a copy of the judgment entered on 19 February 2021 and a garnishee order against the client directing payment to the Barrister of a debt due by the client to the Solicitor.

[22]  The Solicitor then took two steps, the first of which was to lodge an application with the Manager, Costs Assessment seeking an extension of time within which to file an application for review of the costs assessment. That application, lodged on 22 March 2021, was rejected by the Manager by letter dated 12 April 2021. Although the application was only ten days late, the Manager refused an extension of time on the basis that the only ground of review was that the costs were not yet payable, pursuant to the terms of the costs agreement. Having regard to s 199 of the Uniform Law, the Manager was of the view that the function of the costs assessor was a “quantification exercise”, and the assessor had no power to make a binding determination as to whether the costs, so assessed, were payable, nor when they might become payable. He concluded:

With no statutory power for the costs assessor to determine how, when and on what, if any, conditions are imposed within this costs agreement, regarding payment, a party disputing enforcement instead would appear to need to apply to have any enforcement step or application set aside, arguing their grounds for consideration.

By undertaking the “quantification exercise”, the costs assessor had completed the statutory role set out in s 199.

[23]  On 30 March 2021, the Solicitor filed a notice of motion seeking to set aside the registration of the judgment (and the garnishee order) pursuant to UCPR r 36.15. That motion was heard on 27 July 2021, in the Common Law Division, reasons for judgment being delivered on 29 June 2022. On 12 September 2022, the Court ordered that the notice of motion be dismissed, with costs.

…

[38]  … [T]he real issue is reduced to the substantive question, which turns primarily on the effect of s 178 of the Uniform Law:

178  Non‐compliance with disclosure obligations

(1) If a law practice contravenes the disclosure obligations of this Part—

(a) the costs agreement concerned (if any) is void; and

(b) the client or an associated third party payer is not required to pay the legal costs until they have been assessed…; and

(c) the law practice must not commence or maintain proceedings for the recovery of any or all of the legal costs until they have been assessed…; and

(d) the contravention is capable of constituting unsatisfactory professional conduct or professional misconduct….

[39]  The primary judge considered that a contravention of the disclosure provisions in Pt 4.3, Div 3 rendered the second costs agreement legally “non‐existent” and incapable of being the source of rights and obligations between the parties.  Support for that conclusion was found in Wentworth v Rogers at first instance and Wentworth v Rogers in this Court.

[40]  Before considering the authorities, it is convenient to address the question of statutory construction. Terms such as “void”, “invalid” and “null” do not deny the existence of something, whether it be a thing, an agreement or a decision. Rather, they deny the legal effect or consequences of the thing, the agreement or the decision, but usually for a purpose consistent with the statutory context. The immediate question is, therefore, whether such a characterisation denies all legal consequences, or whether the statute itself gives effect to what would otherwise have been contractual rights and obligations.

[41]  It is clear that the word “void” is not used in the Uniform Law to indicate some absolute absence of legal effect. Section 178 itself demonstrates the truth of that proposition. First, subs (2) states that where two persons are liable to pay costs and there is no disclosure to one, the liability of the other under the costs agreement will not be affected. Secondly, s 178(1) itself identifies specific consequences of contravention of the disclosure obligations, which may arise in circumstances where there is a void costs agreement, namely that the affected party is not required to pay the legal costs until they have been assessed and the law practice must not commence or maintain proceedings for recovery of any or all of the legal costs until they have been assessed. The liability of a person to pay legal costs will ordinarily be sourced in a contract. …

…

[46]  It is evident that the purpose of the disclosure obligations is to ensure that the client of a law practice is able to make an informed choice about available legal options and the costs associated with them. That purpose or objective is promoted by avoiding a costs agreement based on inadequate disclosure. However, it is not advanced by avoiding provisions in a costs agreement which, favorably to the client, determine when and in what circumstances costs are payable. The purpose is also not advanced by avoiding a costs agreement which requires that charges be made at a rate below that which would otherwise be identified as fair and reasonable. The latter issue does not arise in the present case, but, significantly for present purposes, the effect of inadequate disclosure is not to terminate the retainer, but to allow that the services may yet be provided (or have been provided) on the basis that the practitioner can only recover fair and reasonable costs for those services. (It is possible that a client might have other relief available in circumstances where a substantial underestimation of the likely costs of a proposed course led to the client adopting a course which would not otherwise have been pursued.)

[47]  The means by which the objectives of Pt 4.3 are pursued are set out in Div 2, titled “Legal costs generally”. Section 172 provides that a law practice must not charge costs that are “more than fair and reasonable in all the circumstances”: s 172(1). Section 172(2) identifies the factors to which “regard must be had” in considering whether legal costs are fair and reasonable. Those factors are, by necessary implication, matters which must be taken into account by a costs assessor undertaking a costs assessment. Section 172(3) provides that regard must also be had to whether the legal costs “conform to any applicable requirements of this Part [and] the Uniform Rules”. Finally, s 172(4) reads as follows:

172 Legal costs must be fair and reasonable

…

(4) A costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable if—

(a) the provisions of Division 3 relating to costs disclosures have been complied with; and

(b) the costs agreement does not contravene, and was not entered into in contravention of, any provision of Division 4.

[48]  Division 4 deals with costs agreements and provides that a client of a law practice “has the right to require and to have a negotiated costs agreement with the law practice”: s 179. Section 180(1)(c) provides that a costs agreement may be made (relevantly) between a barrister retained by a solicitor on behalf of a client, and that solicitor. Further, a costs agreement “must be written or evidenced in writing”: s 180(2).

[49]  Section 181 deals with conditional costs agreements, which are costs agreements that condition the payment of some or all of the legal costs on the successful outcome of the matter to which the costs relate: s 181(1). Such agreements must also be in writing or evidenced in writing, but are subject to further constraints. Section 182 provides that a conditional costs agreement may provide for payment of an “uplift fee”, but a contingency fee calculated by reference to the amount of any award or settlement or the value of any property that may be recovered in any proceeding is forbidden: s 183. The agreement between the Barrister and the Solicitor was not a “conditional costs agreement” for the purposes of s 181 or 182 and did not contravene s 183.

[50]  Of importance for present purposes are the final two provisions in Div 4:

184  Effect of costs agreement

Subject to this Law, a costs agreement may be enforced in the same way as any other contract.

185 Certain costs agreements are void

(1) A costs agreement that contravenes, or is entered into in contravention of, any provision of this Division is void.

Note If a costs agreement is void due to a failure to comply with the disclosure obligations of this Part, the costs must be assessed before the law practice can seek to recover them (see section 178(1)).

(2) A law practice is not entitled to recover any amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been void and must repay any excess amount received.

(3) A law practice that has entered into a costs agreement in contravention of section 182 is not entitled to recover the whole or any part of the uplift fee and must repay the amount received in respect of the uplift fee to the person from whom it was received.

(4) A law practice that has entered into a costs agreement in contravention of section 183 is not entitled to recover any amount in respect of the provision of legal services in the matter to which the costs agreement related and must repay any amount received in respect of those services to the person from whom it was received.

(5) If a law practice does not repay an amount required by subsection (2), (3) or (4) to be repaid, the person entitled to be repaid may recover the amount from the law practice as a debt in a court of competent jurisdiction.

[51]  There are important similarities (and differences) between these provisions and s 178 (in Div 3), dealing with non‐compliance with disclosure obligations. Importantly, the Barrister’s submission that if the costs agreement were void for failure to comply with the disclosure obligations, he was nevertheless entitled to recover costs in circumstances in which he could not have recovered the costs had the agreement not been void, appears to be contradicted by s 185(2). The Barrister’s response was that the absence of any equivalent to s 185(2) in s 178 was telling in favour of a contrary conclusion because s 185 applies only to a contravention of Div 4 and not to a contravention of s 178, which is in Div 3. That is, the unqualified avoidance of the contract pursuant to s 178(1)(a) permitted him to recover costs in circumstances where the agreement would not have permitted that.

[52]  As a matter of statutory construction, that submission should not be accepted. First, it involves reading into s 185(2) a limitation, namely that it only applies to a costs agreement which was void for non‐compliance with the requirements of Div 4. While s 185(1) is concerned only with costs agreements which do not comply with Div 4, subs (2) contains no such express constraint. To imply such a constraint would tend to subvert the purpose of the legislation and introduce an element of incoherence. In accordance with s 35(a) of the Interpretation of Legislation Act 1984 (Vic), the Court should adopt a construction that would promote the purpose or object underlying the Act in preference to a construction which would not promote that purpose or object. However, before turning to explain the force of a purposive construction in the present circumstances, it is convenient to identify a number of textual factors which tell against the proposed reading down of s 185(2).

[53]  First, Div 4 is concerned with the making of costs agreements, including certain conditional costs agreements, whereas Div 3 is concerned only with costs disclosure obligations. Accordingly, it is in Div 4 that one would expect to find provisions relating to costs agreements generally. Section 184 answers that description, providing that subject to the Uniform Law, a costs agreement may be enforced in the same way as any other contract. A reading of s 185(2) as applying to a costs agreement made “void” by any provision of Pt 4.3 accords with the structure of the Uniform Law.

[54]  Secondly, consistently with that construction, the note following s 185(1) refers to the effect of s 178(1). The note forms part of the legislation and is not merely extrinsic material (Interpretation of Legislation Act 1984 (Vic), s 36(2A)(b), (c); Uniform Law, s 6(6)). The note explains why it was not necessary to address in subs (1) cost agreements void for non‐disclosure. It also excludes the possibility that, through inadvertence, the drafter of s 185(2) intended to restrict that provision to agreements which were void because of a breach of Div 4.

[55]  Finally, with respect to the text, s 178(1) is engaged in circumstances where “a law practice contravenes the disclosure obligations of this Part”. That may have an effect on a costs agreement, but the costs agreement itself does not contravene any provision of Div 3 by reason of a failure by the law practice to make proper disclosure. Section 185 identifies the costs agreement itself as that which contravenes a provision of Div 4, but, in the remainder of the section, identifies the consequences for the law practice and its entitlements including where the amount of costs recoverable exceeds the amount which would have been recoverable if “the costs agreement had not been void”.

[56]  It is this last textual point which leads to the potential for incoherence implicit in the Barrister’s submission.

[57]  The most general requirement of Div 4 is that the costs agreement be in writing (or evidenced in writing). That that provision was primarily intended to be protective of the client (or the payer) is demonstrated by the fact that adverse consequences for a failure to comply with that provision are visited on the law practice. A breach of s 180, imposing that requirement, does not open the law practice to a charge of unprofessional conduct or professional misconduct. By contrast, a breach of the disclosure obligations imposed on the law practice under Div 3 does expose the law practice to such disciplinary proceedings, and irrespective of whether there is a costs agreement: s 178(1)(d). Thus, while the law practice could not obtain an entitlement to costs from the avoidance of a costs agreement under Div 4, on the Barrister’s construction, it could obtain such a benefit as a result of its own misconduct under Div 3. This result would involve incoherence between the effects of Div 3 and Div 4. Indeed, quite apart from s 185(2), the Court would not, in the absence of a clear expression, construe a legislative provision protective of one party to allow the party in breach of that provision to obtain a benefit from its own wrongful conduct at the expense of the protected party.

[58]  It follows that s 178(1) does not have the effect of preventing the Solicitor from defending a claim for a judgment with respect to the costs incurred by the Barrister in circumstances where cl 4 of the costs agreement would have precluded that claim had the agreement not been void. That outcome is the result of the application of s 185(2), making it unnecessary to consider whether the same outcome would result from the application to the Barrister’s claim of restitutionary principles.

…

(emphasis added, footnotes deleted)

The decision is salutary as to the operational life of a barrister’s fee agreement conditions favouring the engaging solicitor.  The relevant condition in the case at hand was “payment of the fees under this agreement is conditional upon [the Solicitor] recovering the Barrister’s fees from either the client or the respondent to the appeal … to the intent that the Solicitor will only be liable for the Barrister’s fees under this agreement to the extent that one or more of those parties has put him into the necessary funds to pay the Barrister’s fees.”.  Despite the agreement being void for enforcement by the barrister, it remained that payment event had not ensued by the time the Barrister sought, unconditionally, to recover his fees.  Each case, of course, will turn on its own facts.