Malvina Park Pty Ltd v Johnson

1. [1]

   HIS HONOUR: By an amended summons filed 24 August 2018, the plaintiff, Malvina Park Pty Ltd, seeks leave to appeal against a decision of a costs review panel pursuant to s 89(1)(b) of the Legal Profession Uniform Law Application Act 2014 (NSW) (“the Application Act”).

2. [2]

   Leave is required in this Court as the amount in dispute is less than $100,000, namely, $46,152.70, being the difference between the amount of costs claimed of $70,800 and the amount allowed of $24,247.30.

BACKGROUND FACTS

1. [3]

   The defendant, Benjamin Johnson, was injured in a motor vehicle accident on 22 May 2016. He made a claim for compensation under the Motor Accidents Compensation Act 1999 (NSW) (“MACA”). Initially, he was represented by another law practice, Brydens. He entered into a costs agreement with that firm on 2 June 2016.

2. [4]

   On 22 August 2016, the defendant contacted the principal of the plaintiff, Mr Firth.

3. [5]

   On 22 September 2016, the plaintiff sent to the defendant documents disclosing the basis upon which the plaintiff would propose to charge, together with a proposed costs agreement. The costs agreement proposed a lump sum fixed fee of $80,000 plus GST, with a discount depending on how long it took to resolve the matter, which was expressed in the following terms:

4. [6]

   The defendant signed the costs agreement on 4 October 2016 (“the costs agreement”). Two days later, the defendant sent an email to Mr Firth, in which he said he had been advised by other law firms that the plaintiff’s basis for charging was excessive. The defendant said he would take his case to another law firm. Nevertheless, on 12 October 2016 the defendant decided he wished to retain the plaintiff.

5. [7]

   On 14 December 2016, the defendant accepted an offer to settle his compensation claim for $500,000 inclusive of costs.

6. [8]

   The settlement proceeds were received from the insurer on 23 January 2017. On that day, the plaintiff provided the defendant with an accounting of how the proceeds would be allocated, including the plaintiff’s fee. The defendant signed an authority to disburse the funds, however, on 10 February 2017, Brydens announced that they were again acting for the defendant and sought an itemised bill. Subsequently, Brydens made an application for costs assessment on behalf of the defendant.

7. [9]

   By a statement of reasons dated 23 January 2018, a costs assessor found that in relation to the costs agreement sent on 22 September 2016, the plaintiff complied with the disclosure obligations imposed by the Legal Profession Uniform Law (NSW) (“the Uniform Law”) s 174(1), (2)(a) and (6). Those provisions will be set out later in this judgment but, in substance, required the plaintiff to disclose to the defendant in writing information about the basis upon which legal costs would be calculated and an estimate of such costs as well as disclosing certain rights (there is no dispute in these proceedings as to those findings).

8. [10]

   The costs assessor also found that the plaintiff complied with regs 8(b)-(e) of the Motor Accidents Compensation Regulation 2015 (NSW) (“the Regulation”). Those provisions set out various requirements that must be met for a law practice and client to contract out of the cap on legal fees for claims under the MACA.

9. [11]

   However, the costs assessor found that the plaintiff did not comply with s 174(3) of the Uniform Law. That provision required the plaintiff to take all reasonable steps to satisfy itself that the client understood and consented to the costs agreement. The consequence of that finding was that reg 8(a) of the Regulation was not satisfied and the maximum costs recoverable by the plaintiff were capped in accordance with reg 6 and Sch 1.

10. [12]

    The plaintiff sought a review under s 83 of the Application Act.

11. [13]

    On 14 May 2018, the costs review panel upheld the finding that the plaintiff failed to comply with s 174(3) of the Uniform Law. Having found non-compliance with s 174(3), the panel determined that the costs agreement was void by reason of s 185 of the Uniform Law.

12. [14]

    The panel's reliance on s 185 was erroneous. That provision applies only to Ch 4 Div 4 of the Uniform Law. Section 174 is in Div 3.

13. [15]

    On 25 June 2018, the plaintiff filed the summons in these proceedings, in which it contended, inter alia, that the panel erred by relying on s 185. On 2 August 2018, the defendant's solicitors drew the error to the panel's attention.

14. [16]

    On 14 August 2018, the panel advised the parties that the reference to s 185 of the Uniform Law in its reasons at para 43 was an inadvertent error. The defendant submitted the reference to s 185 was capable of correction as a “mere inadvertent slip”.

15. [17]

    By the amended summons, the plaintiff sought that the Court set aside the review panel’s decision and substitute a determination as to costs in the sum of $70,800. Alternatively, the plaintiff sought (in order 3) the review panel and the costs assessor’s determination be set aside and that the Court direct Manager Costs Assessment refer the assessment to another costs assessor to make the assessment in accordance with law.

16. [18]

    The issues in the proceedings will be best examined after the relevant legislative provisions are exposed.

LEGISLATION AND RULES

1. [19]

   Sections 58 and 59 of the MACA is in the following terms:

2. [20]

   Section 63(1) of the MACA provides:

3. [21]

   Regulation 5 of the Regulation provides:

4. [22]

   Regulation 6 fixes maximum costs recoverable by legal practitioners.

5. [23]

   Regulation 8 provides:

6. [24]

   As mentioned, the costs assessor found the conditions of reg 8(b), (c) and (d) had been met, but that the plaintiff had failed to comply with the contracting out provisions (per reg 8(a)) because it had failed to comply with s 174(3) of the Uniform Law. That determination was, in substance, and as earlier noted, confirmed by the review panel (at para 48).

The Uniform Law

1. [25]

   As the plaintiff was first instructed after 1 July 2015, the applicable law is the Uniform Law, the Application Act and the regulations made thereunder (see cl 18, Sch 4 of the Uniform Law).

2. [26]

   The Uniform Law is not an Act of the New South Wales Parliament. The Uniform Law was enacted as law in Victoria as Sch 1 to the Legal Profession Uniform Law Application Act 2014 (Vic). It is applied as a law of NSW by s 4 of the Application Act.

3. [27]

   One consequence is that, in undertaking the task of statutory construction, the Court is required to apply the Interpretation of Legislation Act 1984 (Vic) (“Victorian Interpretation Act”) rather than the Interpretation Act 1987 (NSW) (see s 7(1) of the Uniform Law).

4. [28]

   Section 36 of the Victoria Interpretation Act provides:

5. [29]

   Reference may also be made to s 35 of the Victorian Interpretation Act which provides:

6. [30]

   The objectives of the Uniform Law are expressed in s 3 of the Act and in the following terms:

7. [31]

   The definitions of the Act are found in s 6. The following definitions are relevant:

8. [32]

   Part 4.3 is entitled “Legal Costs”. Division 1 is entitled “Introduction” and contains the objectives of Pt 4.3, which are expressed in s 169 and in the following terms:

9. [33]

   Division 1 also limits the scope of the part with respect to commercial or government clients in s 170(1)(a) and (2)(a), (b), (e) and (f) as follows:

10. [34]

    The defendant emphasised that he did not fall within the exclusion concerning commercial and government clients.

11. [35]

    Division 2 is entitled “Legal costs generally”. Section 172 falls under that Division. It bears the hearing, “Legal costs must be fair and reasonable”. Section 172(1) provides as follows:

12. [36]

    Division 3 is central to the dispute in this matter. That division is entitled, “Costs disclosure”. Section 174 is in the following terms:

13. [37]

    Section 178(1)(a) and (3) provides:

The Application Act

1. [38]

   Section 89 concerns appeals and is in the following terms:

Legal Profession Uniform General Rules 2015 (NSW) (“the General Rules”)

1. [39]

   In the discussion of the issues in this matter below, a principal tenet of the plaintiff’s contentions is that, even if the review panel could, in law, substitute s 178 for s 185 in its decision, it was wrong in law to find the costs agreement void under s 178 because s 174(3) was not a disclosure obligation under Pt 4.3 of the Uniform Law and the plaintiff had satisfied all applicable disclosure obligations.

2. [40]

   Nonetheless, the plaintiff raised another issue that, if a practice failed to meet the requirement of s 174(3) (and that the provision was a disclosure obligation), the review panel failed to consider the disapplication of s 178(1) as effected by s 178(3) and r 72A of the General Rules.

3. [41]

   Rule 72A of the General Rules provides as follows:

THE ISSUES

1. [42]

   The plaintiff identified four issues for the appeal which were successive, each requiring, in the submission of the plaintiff, determination before the other. The issues so stated by the plaintiff were as follows (with some modifications with respect to Issues 1 and 2):

   1. (1)

      Is s 174(3) of the Uniform law a "disclosure obligation" within the meaning of s 178(1)? The plaintiff submitted that it was not.

   2. (2)

      If, contrary to the plaintiff’s submission, the answer to (1) is "yes", did the plaintiff take reasonable steps to satisfy itself, for the purposes of s 174 (3)? The plaintiff submitted that it did.

   3. (3)

      If, contrary to the plaintiff’s submission, it failed to reasonably satisfy itself under s 174(3), should the Court be satisfied that the contravention was not substantial and that it would not be reasonable to expect that the client would have made a different decision in any relevant respect? The plaintiff submitted that the Court should be so satisfied.

   4. (4)

      If a valid costs agreement provides for a fixed fee for the conduct of a personal injury claim, is it appropriate to determine whether the fee is fair and reasonable by retrospectively calculating the value of the work on an hourly basis following an early settlement? The plaintiff submitted that it was not, and that a proper assessment of the fee should take into account the value of the certainty that a fixed fee agreement provided.

2. [43]

   Issue 3 invited consideration of r 72A of the General Rules. Issue 4 concerned the question of relief if the Court were to find the costs agreement to be valid.

3. [44]

   The defendant’s submission consisted of two elements.

4. [45]

   The defendant’s primary submission was that leave to appeal should be refused.

5. [46]

   The defendant, nonetheless, engaged in submissions regarding the above issues both with respect to the question of leave and as to specific issues raised. As to the specific issues raised by the plaintiff, the defendant contended (by reference to the numbered issues raised by the plaintiff above):

   1. (1)

      The defendant gave its answer in two parts:

   2. (2)

      The plaintiff failed to comply with s 174(3) and, hence, the costs agreement was void. This contention corresponded to the Contention filed by the defendant on 3 August 2018.

   3. (3)

      The plaintiff should not be entitled to raise, for the first time on appeal, the operation of r 72A of the General Rules. Alternatively, r 72A was not engaged by the circumstances of the matter.

   4. (4)

      This issue does not constitute a valid ground of appeal, does not arise in the proceedings and any judgment in relation to the same would amount to an advisory opinion: Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 (“Bass”).

6. [47]

   There was also an issue as to whether the plaintiff should be granted leave to adduce evidence via the affidavit of Mr Firth sworn on 3 August 2018 and various documents exhibited thereto. The area of dispute narrowed during the proceedings with the defendant not objecting to primary documents exhibited to Mr Firth’s affidavit sworn 3 August 2018 constituted by Exhibits A-J and, it would appear, the various annexures to Mr Firth’s affidavit.

7. [48]

   It was agreed by the parties at the hearing of this matter that it was appropriate and convenient to consider the admission of the balance of the evidence of Mr Firth in the course of the Court’s deliberation on the issues on the appeal.

8. [49]

   The plaintiff’s written submissions in this respect appeared in a reply submission in the following terms:

9. [50]

   The defendant’s submissions in this respect, in summary, appear below:

   1. (1)

      As to Mr Firth’s affidavit, the evidence given concerned matters which occurred prior to or during the currency of the retainer. Such evidence was available at the time of costs assessment and the review. No explanation of why it was not before the costs assessor has been provided. Nor is there an explanation of why, once the costs assessor's views were known, the plaintiff did not seek to put the material before the review panel.

   2. (2)

      As the defendant referred to in written submissions, the plaintiff was informed of the case it was required to meet on costs assessment. In relation to the primary ground of appeal, that it failed to comply with s 174(3) and that s 174(3) was a "disclosure obligation", the defendant's submissions stated:

   3. (3)

      The plaintiff chose to answer that contention in the following way:

   4. (4)

      There is no evidentiary material which the plaintiff now seeks to adduce which would not have been available to it during the costs assessment or review. Furthermore, to the extent that evidence was required to be tested on oath, a costs assessor and a review-panel, have that power: see s 69(1A), s 93(1)(b)(ia) of the Application Act, s 79 of the Interpretation Act 1987 (NSW).

   5. (5)

      The plaintiff, a legal practice, chose to adopt a particular strategy on costs assessment and review.

   6. (6)

      An appeal by way of rehearing is not a chance to begin again, so that a different strategy can be adopted. The Courts are reluctant to entertain such an approach: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35.

   7. (7)

      The defendant further submitted:

10. [51]

    A good deal of the material in Mr Firth’s affidavit was in evidence before the review panel as demonstrated, for the most part, by the table attached to the reply submissions of the plaintiff filed on 21 November 2018. It may be noted that Mr Firth’s statements of belief (paras 30 and 37-39) were not put before the review panel (or costs assessor) as evidence but rather were the subject of a submission. It was submitted that the contentions have been put in admissible form as evidence although most of the paragraphs in question appeared in the form of a submission or opinion.

11. [52]

    It is unnecessary to resolve the issues raised by the plaintiff as to the operation of s 89(4), save to note the recent discussion of the Court of Appeal as to the meaning of the expression rehearing in the context of a trial as opposed to an appeal: Macquarie v Hunter New England Local Health District [2019] NSWCA 98 at [8] and [9].

12. [53]

    Notwithstanding the force of the defendant’s submissions as to why the Court should refuse the additional or substituted evidence (over that which was before the review panel), I consider that it is appropriate to receive the evidence sought to be led by the plaintiff in order to consider the plaintiff’s application for leave pursuant to s 89(1)(b) of the Application Act as the evidence will expose the nature and content of the evidence the plaintiff would rely upon in relation to the issues raised by it if leave were granted and, more broadly, illuminate the issues of principle and merit sought to be ventilated by the plaintiff or any shortcomings with respect to the same for the purpose of determining the question of leave.

13. [54]

    However, one additional observation should be made at this juncture. The plaintiff sought to rely on Mr Firth’s evidence in order to make good its contentions with respect to issues 2 and 3 by referring, in that respect, to Mr Firth’s state of mind and whether he formed a “reasonable opinion” about his client’s understanding of the costs agreement (based, in part, upon the paragraphs of his affidavit referred to at [51] of this judgment).

14. [55]

    Those matters may be relevant to the issues raised under s 174(3) and r 72A(2) although the evidence of those subjective beliefs of Mr Firth as a principal of the law practice needs to be assessed in the light of the actions taken by the law practice at the time of the disclosure under s 174 and, in particular, the actual steps taken by the law practice to meet its obligations under s 174(3). Importantly, the question raised by s 174(3) is whether the law practice took all reasonable steps to satisfy itself that the client had understood and given cost to the proposed course of action and the proposed costs agreement.

15. [56]

    Thus, the obligation imposed upon the law practice is to take “all reasonable steps” in order to satisfy itself the client has understood and gave consent. “Steps”, in that respect, refers to the measures or actions taken by the law practice. The provision focuses on the “proposed course of action” in addition to “the proposed costs agreement” and focuses upon the steps actually taken to reach a state of satisfaction.

16. [57]

    Plainly, a law practice may make an assessment of the client’s understanding and consent for the purpose of meeting its obligations under s 174(3) based upon the surrounding circumstances at the time the obligations are required to be discharged but it must, nonetheless, actively take all reasonable steps available to it to ensure the requisite understanding and consent under the subsection. In this case, that obligation obviously extended to the component of the costs agreement which stipulated a fixed price agreement in the context of the litigation in contemplation (and the likely course of the same). Thus, the question becomes what steps did the law practice actually take to satisfy itself of the client’s understanding and consent of proposed costs of that kind and whether those steps conformed with the obligation imposed on the law practice to take “all reasonable steps” in that respect.

Submissions for the Plaintiff

1. [58]

   As to the first issue, the plaintiff submitted:

   1. (1)

      The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 (“Project Blue Sky”) at [69]-[71].

   2. (2)

      Section 178(1)(a) of the Uniform Law provides that a costs agreement is void if a law practice contravenes the "disclosure obligations" of Pt 4.3. The only disclosure obligations relevant to this case are contained in Div 3, s 174. Section 174(1), (2) and (6) impose disclosure obligations on the law practice. They require the law practice to disclose information to the client in writing. Section 174(3) does not require the disclosure of information to the client. Rather, it imposes a duty on the law practice to satisfy itself that the client has understood and consented to, in this case, the proposed costs agreement.

   3. (3)

      "Disclosure" is a noun related to the verb "disclose". The natural meaning of "disclose" is to reveal, make known, divulge, tell, impart, communicate or pass on information by one entity to another. The expression "disclosure obligation" is inapt to describe a duty to satisfy oneself of another's state of mind. The expression "disclosure obligation" naturally describes the provision of information by a law practice to a client as required by s 174(1) and (2).

   4. (4)

      A strong indicator of the meaning to be ascribed to "disclosure obligation" is found in r 72A of the General Rules, which provides for disapplication of s 178(1). Rule 72A(1) provides that the rule only applies where the law practice has contravened a disclosure obligation. To be relieved from the consequence of the contravention, the Court must be satisfied that the law practice took reasonable steps to comply with the disclosure obligation: r 72A(2)(a). It would be incoherent to find a contravention of s 174(3) on the basis that the law practice did not take reasonable steps to satisfy itself about the client's understanding, then allow for relief from that contravention by a finding under r 72A(2)(a) that the law practice did take reasonable steps to comply. Section 174(3) could not be a disclosure obligation because “it produces an incoherent result where one has to find a contravention of a requirement to take reasonable steps and then the possibility of being satisfied that reasonable steps were taken to disapply that”. This points to a conclusion that the disclosure obligations contemplated by s 178(1) and r 72A are the obligations in s 174(1), (2) and (6), but not the duty in s 174(3).

   5. (5)

      While not a "disclosure obligation", contravention of the duty imposed by s 174(3) is capable of having consequences that are harmonious with the object of the Uniform Law. Contravention of s 174(3) is capable of being an offence (s 39) and is capable of constituting unsatisfactory professional conduct or professional misconduct (ss 34, 35, 178(1)(d) and 298(a) of the Uniform Law).

   6. (6)

      The only decision to have considered the correct construction of ss 174(3) and 178(1) is Frigger v Madgwicks [2018] VSC 281 (“Frigger”). In that matter, Gourlay JR decided at [28] and [43] that s 174(3) did not impose a "disclosure obligation" on the law practice. Rather, it required the law practice to reach a state of self-satisfaction. Accordingly, the Court held that any failure to comply with s 174(3) could not engage s 178(1).

   7. (7)

      The defendant’s argument that the headings of both Div 3 and s 174 indicate that s 174 contains disclosure obligations and therefore that s 174(3) is a disclosure obligation should be rejected. Other subsections of s 174 are clearly not disclosure obligations. The plaintiff submitted that s 174(4) is not a disclosure obligation as it simply provides an exception to the obligations under s 174(1). Subsection (5) similarly provides an alternative to s 174(1). The plaintiff submitted that subs (6) is not a disclosure requirement as it governs the way in which information, the subject of other disclosure obligations, is to be provided to a client. In the light of the other subsections of s 174, the heading of the Division and the section are not determinative of the contents of each subsection.

Submissions for the Defendant

1. [59]

   As to the first issue, the defendant submitted:

   1. (1)

      The plaintiff’s contention that the word disclosure is inapt to describe requirements imposed by s 174(3) and, therefore, that section could not be a “disclosure obligation” was at odds with the overall structure of the Act. It was also contrary to the second reading speech of the Uniform Law, in which it was stated that: "Section 174 deals with the disclosure obligations of law practices regarding clients” (Victoria, Parliamentary Debates, Legislative Council, 16 April 2015, 1006, (Sue Pennicuik)).

   2. (2)

      The plaintiff’s characterisation of the obligation imposed by s 174(3) is also in error. It is not merely an obligation that the law practice is satisfied that the client has understood and consented to the proposed “costs agreement” in the sense that the client understood the contractual terms presented by the law practice. The provision required the law practice to be satisfied that the client both understood and gave consent to the proposed costs. Consent means informed consent, in the provision and concerned information important to a client regarding a cost agreement and a solicitor’s state of satisfaction regarding the client’s understanding and consent as to the proposed course of action in a matter and proposed costs. It is entirely possible, if not likely, that attendant on this obligation will be a requirement that a lawyer actively engage with and discuss the proposed costs with a client. Such an obligation fits squarely within the concept of “imparting, communicating or passing on information by one entity to another”.

   3. (3)

      As to the construction of the Act, in particular the headings within the Uniform Law, it was submitted that, unlike the provisions of the Interpretation Act 1987 (NSW) applied, the Victorian Interpretation Act deems that headings to individual sections and clauses form part of the Act. Accordingly, the sections of the Uniform Law are not merely to be "interpreted by the light" of their headings – those headings form part of the operative text of the Act and inform the meaning to be given to the words under them: Inglis v Robertson (1898) 25 R (Ct of Sess) 70; [1898] AC 616 (“Inglis”). Headings in the Uniform Law must therefore inform the maxim noscitur a sociis whereby words in a statute take their colour from the context in which they appear.

   4. (4)

      Section 178(1) of the Uniform Law does not state: "If a law practice contravenes any obligation arising under this Part to disclose information to a client". The section imposes sanctions for conduct that "contravenes the disclosure obligations of this Part".

   5. (5)

      The defendant did not dispute that the word “disclosure” has a natural and obvious meaning. However, the words 'disclosure obligations' when paired together must be construed as a composite phrase. The meaning of that phrase cannot be arrived at by simply defining its constituent elements. As Mahoney JA observed in Provincial Insurance Australia Pty Ltd v Consolidated Wood Products (1991) 25 NSWLR 541 (“Consolidated Wood”) at 560:

   6. (6)

      This is consistent with the majority statement in Project Blue Sky at [78] that:

   7. (7)

      Section 178 is placed at the conclusion of Div 3 of Pt 4.3 of the Uniform Law. Section 178(1) contains consequences of contravention. The first is that any costs agreement will be void. That gives strong support to the proposition that it is a condition of validity of a costs agreement that the obligations under the heading "Disclosure of law practice regarding clients" are complied with. This is reinforced by a consideration of the nature of the obligation in s 174(3), being to take reasonable steps to satisfy itself that the client "has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs". That state of understanding may well not be achieved by the client merely by being given information about costs such as would satisfy the obligations in s 174(1) and (2). It is not difficult to accept that a client – especially one who is unsophisticated – to whom s 174(1) and (2) information has been imparted may nevertheless still not understand and consent to the course of conduct of the matter and the proposed costs. Disclosure under subss (1) and (2) is capable of giving the client information but not understanding.

   8. (8)

      It is submitted that the framework of Div 3, taken with the headings therein, reveal an intention of Parliament to enumerate "the disclosure obligations of [Part 4.3]" as referred to in s. 178(1). In effect, the headings of the statute point to where one will find a “disclosure obligation”.

   9. (9)

      In Saunders v Borthistle (1904) 1 CLR 379; [1904] HCA 13 the High Court considered the scope of the phrase "travelling stock" found in s 97 of the Pastures Protection Act 1902 (Cth). In doing so, regard was had to the principle laid-down in Inglis, namely, that where sections of an Act are collected by headings they must be read in connection with those headings.

   10. (10)

       In essence, the defendant contended that s 174(3) is an ancillary "disclosure obligation" that attaches to the "main disclosure requirement" in s 174(1). Hence, the opening words of s 174(3), “If a disclosure is made under subsection (1)”, merely concerns the ancillary operation because a solicitor cannot reasonably assure a state of satisfaction without there being disclosed information. The purpose of the section is to ensure that a law practice cannot merely engage in perfunctory mechanical compliance with ss 174(1) and (2). In practice, s 174(3) will impose additional obligations on a law practice to impart information that will vary from client to client. The scope and nature of those precise obligations is to be objectively measured by the “reasonable steps” taken by the practice. This approach to s 174(3) is consistent with a stated object of the Act, namely, "to ensure that clients of law practices are able to make informed choices about their legal options and the costs associated with pursuing those options". A choice which is not informed by understanding and consent is not an "informed choice".

   11. (11)

       The defendant contended that the decision of Gourlay JR in Frigger is wrong and should not be followed. The Court appeared not to have had the benefit of full argument on the matter, and in any event the clients conceded that they "understood and gave consent to the course of action as outlined in the Disclosure Statement and pursuant to the oral and written instructions of the applicant": at [6].

Plaintiff’s Reply Submissions

1. [60]

   In reply, the plaintiff submitted:

   1. (1)

      The defendant correctly observed that the headings form part of the text of the Act, however, this provides little assistance in deciding whether the requirement in s 174(3) to reach a personal state of satisfaction should be characterised as a disclosure obligation.

   2. (2)

      The defendant submitted that s 174(3) imposes an obligation on the lawyer to actively engage with and discuss the proposed costs agreement with a client. Even if that is correct, an obligation to engage is not the same thing as an obligation to disclose information.

Consideration

1. [61]

   The principles of statutory construction were outlined by French CJ and Hayne J (with whom Kiefel J agreed in this respect) in Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross (2012) 248 CLR 378; [2012] HCA 56 at [23]-[26] as follows:

2. [62]

   In Taylor v The Owners – Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9 the High Court (French CJ, Crennan and Bell JJ) further dismissed those principles and stated at [39] as follows:

3. [63]

   In SZTAL v Minister for Immigration and Border Protection (2017) 347 ALR 405; [2017] HCA 34, Kiefel CJ, Nettle and Gordon JJ said at [14]:

4. [64]

   Reference may also be made to Ryde Developments Pty Ltd v Property Investors Alliance Pty Ltd [2017] NSWCA 339 per Payne JA (with whom Beazley P and Barrett AJA agreed) at [39]-[40]:

5. [65]

   In this case, “legitimate means” include reference to headings of provisions of Pt 4.3 Div 3. The headings act as a significant aid to construction (see Credit Tribunal, Re: Ex parte General Motors Acceptance Corp Australia (1977) 137 CLR 545; [1977] HCA 34 (“Credit Tribunal”); see also Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; [1990] HCA 17 (“Concrete Constructions”). However, in these proceedings, they form part of the text of the provisions of the division and directly inform the meaning to be given to the words of the section (per s 36 of the Victorian Interpretation Act).

6. [66]

   A construction that would promote the principle or object underlying the Act (whether or not that purpose or object is expressly stated in the Act) shall be preferred to a construction that would not promote that purpose or object (s 35(a) of the Victorian Interpretation Act).

7. [67]

   Section 178 of the Uniform Law provides that a costs agreement will be void if a law practice contravenes the “disclosure obligations of this Part”. The Part to which the provision refers is Pt 4.3 which concerns “Legal Costs”. It is common ground that any disclosure obligation relevant to this case is to be found in that Division.

8. [68]

   The expression “disclosure obligations” is not defined in the Uniform Law.

9. [69]

   The plaintiff contended that the natural and ordinary meaning of “disclose” is to reveal, make known, divulge, tell, impart, communicate or pass on information from one entity to another. Section 174(1), (2) and (6) conforms with that meaning because those subsections require the conveyance of information and its nature and content. Section 174(3) has no such function and imposes no such obligation, it was contended, but rather imposes a duty in a law practice to satisfy itself that the client has understood and consented to various things. It follows, it was submitted, that s 174(3) was not a disclosure obligation.

10. [70]

    The difficulty with the plaintiff’s contention in this respect is that it fails to appreciate that the provisions of s 178 concern “disclosure obligations”, an expression which, as the defendant properly submitted, is a composite phrase, the meaning of which cannot be arrived at by simply defining its constituent elements: Consolidated Wood at 560-561 and, in particular, deriving the meaning from the ordinary meaning of the word “disclosure”.

11. [71]

    That the expression “disclosure obligation” takes a composite form in s 178 is emphasised by the word “the”; namely, in the expression “the disclosure obligations”. It might also be observed that the provisions of s 174 recognise a distinction between “disclosure obligations”, a phrase used in the headings of ss 174-178, and “disclosure” per se, such as the main disclosure requirement in s 174(1) which stipulates the context of the information to be provided to the client by the law practice.

12. [72]

    I accept the submission of the defendant that the framework of Div 3, when taken with the headings of each section therein revealed an intention of the Parliament to enumerate the disclosure obligations of Pt 4.3 as referred to in s 178(1).

13. [73]

    As was observed by the High Court in Credit Tribunal at 561, the division of a statute will often be a significant aid in its construction: see also Concrete Constructions at [6]-[13].

14. [74]

    Further, the meaning of the composite phrase may, in my view, be derived, in part, from the heading of s 174 which refers generally to “disclosure obligations of law practice regarding clients”. There is no differentiation, in that respect, between the constituent elements of s 174.

15. [75]

    Contrary to the submissions of the plaintiff, the provisions of s 174(4), (5) and (7) are not demonstrative that s 174 deals with matters other than disclosure obligations because the provisions deal with circumstances which confine or limit the nature or content of the disclosure required under the main disclosure obligation in s 174(1). They form part of the overall framework as to what constitutes a disclosure obligation for the purposes of that section.

16. [76]

    It is true that the heading to s 174(3) is “Client’s consent and undertaking” but the opening words of that subsection create, in my view, a connection between the main disclosure required in s 174(1) and that the requirement reflected in the heading of s 174(3) suggestive of statutory intention that a “disclosure obligation”, as referred to in the heading of s 174, requires not only the provision of disclosure by way of designated information but a requirement to impart that information so as to ensure, as subsection states, the client understands and consents.

17. [77]

    This construction is consistent with the objects of Pt 4.3 as reflected in s 169(a), namely, to “ensure that clients of law practices are able to make informed choices about their legal options and costs associated with pursuing those options” (emphasis added). I accept the submission of the defendant that an “informed choice” connotes understanding and consequently informed consent. This conclusion is reinforced by the terms of s 174(3) itself. The obligation imposed by the provision is that the law practice takes all reasonable steps to satisfy itself that the client has understood and given consent to both “the proposed course of action for the conduct of the matter” and “the proposed costs”.

18. [78]

    As the defendant contended, that state of understanding, so far as it requires an understanding of a proposed course of action for the conduct of the matter (in contrast to the mere conveyance of proposed costs) is consistent with a conclusion that the legislature intended the disclosure obligation to extend beyond the provision of the information provided in s 174(1) and (2). I accept that, in the circumstances, the legislature’s intention was that the law practice’s reasonable steps to satisfy itself of the client’s understanding and consent is a precondition to the validity of a cost agreement such that the agreement would, pursuant to s 178, be rendered void by a failure to meet that obligation.

19. [79]

    In any event, attendance upon the obligation in s 174(3), as described in the preceding paragraph must be an obligation for the law practice to engage with the client to discuss the proposed course of action and the proposed cost agreement consistently with the meaning of disclosure so far as it concerns communicating information.

20. [80]

    The plaintiff contended that a strong indication of the meaning to be ascribed to a disclosure obligation was to be found in r 72A of the General Rules. It was submitted that it would be incoherent to find a contravention of s 174(3) on the basis that the legal practice did not take reasonable steps to satisfy itself about the client’s understanding and consent but then to allow relief from the contravention by a finding under r 72A(2)(a) which concerns whether a law practice took reasonable steps to comply with the disclosure obligations of Pt 4.3 of the Uniform Law.

21. [81]

    The submission, however, fails to recognise the different operation of the provisions of s 174(3) and r 72A(2)(a).

22. [82]

    Rule 72A is designed to ameliorate the operation of Pt 4.3 of the General Rules in cases of contravention where a cost assessor is satisfied:

    1. (1)

       the law practice took reasonable steps to comply but had in fact previously failed to comply (the provision refers to “before becoming aware of the contravention”);

    2. (2)

       the law practice rectified, as far as practicable, the contravention within 14 days of becoming aware of it; and

    3. (3)

       the contravention was not substantial and it would not be reasonable to expect that the client would have made a different decision in any relevant respect.

23. [83]

    Rule 72A only operates where the law practice has contravened the disclosure obligations of Pt 4.3 in relation to a particular matter. That may concern the main disclosure requirement or any other disclosure requirement.

24. [84]

    In that context, the question raised by r 72A(2)(a) is not whether the law practice had taken reasonable steps to satisfy itself of the matters referred to in Pt 4.3 per se (because it had contravened the provision) but whether the law practice had taken reasonable steps “to comply” before becoming aware of a contravention. In other words, the question raised by r 72A(2)(a) was whether the law practice had taken reasonable steps, notwithstanding the contravention, to comply. The “reasonable steps” there referred to concern steps taken to comply. The assessment made by the Court or costs assessor is whether there were reasonable steps taken “to comply” with Pt 4.3 in the circumstances where the law practice had contravened those obligations, and therefore, concerned steps taken in rectification of some omission or deficiency (which may or may not have arisen with respect to the obligations under s 174(3)).

25. [85]

    I accept the submission of the defendant that r 72A is intended to cover circumstances in which there has been an inadvertent contravention of the disclosure obligations which is rectified and the contravention was not material to the client's decision.

26. [86]

    So much is true of contraventions of s 174(3), the subject matter of the present proceedings.

27. [87]

    Further, the provisions of r 72A(2) only provides an amelioration of the effect of the effect of s 178 if the law practice also complies with r 72A(2)(b) and (c) which, inter alia, concern rectification (so far as practicable) where the law practice learns of a contravention by providing the “information” required to be “disclosed” under Pt 4.3 Div 3 (no submission was made as to the use of the word information when read in that context is not wide enough to include disclosure obligations under s 174(3)).

28. [88]

    Ultimately, the plaintiff’s submissions conflated the requirements to take reasonable steps under s 174(3) and r 72A(2)(a), when they are addressed to those different situations.

29. [89]

    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, as follows:

30. [90]

    Thus, at [43], Gourlay JR stated:

Conclusion

1. [91]

   It follows that I reject the plaintiff’s submissions with respect to issue 1 and answer the question raised at [42(1)] of the judgment in the affirmative. The review panel was correct in the conclusion reached that s 174(3) was a disclosure obligation for the purposes of s 178(1) of the Uniform Law.

Relevant Principles

1. [92]

   In Ackerman v Morgan [2019] NSWSC 1250, the Court considered principles concerning leave to appeal, with respect to an issue of costs, albeit in a different statutory context, namely, an appeal under s 40(2)(c) of the Local Court Act 2007 (NSW) as follows (at [49]-[53]):

2. [93]

   Those principles are, generally speaking, applicable in the present matter.

3. [94]

   Reference may also be made to a number of other authorities in the present context as discussed below.

4. [95]

   The determination of an application for leave is "is a preliminary procedure recognized by the legislature as a means of enabling the Court to control in some measure the volume of appellate work requiring its attention": Coulter v R (1988) 164 CLR 350; [1988] HCA 3 (“Coulter”) at [9].

5. [96]

   In Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 (“Be Financial”) at [35], the Court of Appeal (per Basten JA, with Tobias JA agreeing) held that the High Court's statement in Coulter "is clearly applicable to civil, as well as criminal, appellate jurisdiction".

6. [97]

   In Gibson v Drumm [2016] NSWCA 206 the Court of Appeal (per Beazley P and Simpson JA) stated, in the context of an appeal from a costs judgment of Young AJ, at [19]:

7. [98]

   I also accept what was observed by Schmidt J in Metziya Pty Ltd v ICR Engineering Pty Ltd [2016] NSWSC 1703 at [12]:

8. [99]

   Reference may also be made to the judgment of McCallum J in Secure Parking Pty Limited v Ralan Property Services Pty Limited (No 1) [2018] NSWSC 660 at [12] as follows:

9. [100]

   In Clutch & Brake Australia Pty Ltd v Khamis [2018] NSWSC 777, Harrison AsJ refused leave for the following reasons (at [42]):

10. [101]

    A number of provisions of the Civil Procedure Act 2005 (NSW) apply in respect of an application for leave: Be Financial at [36]-[39]; see also Rose v Tunstall [2018] NSWCA 241 at [15]-[18].

11. [102]

    These include s 58, which relevantly provides:

12. [103]

    Section 60 is also relevant. It provides:

13. [104]

    In Be Financial the Court considered the relevance of s 58 in an application for leave to appeal to the Court of Appeal and said (at [36]):

14. [105]

    In relation to the relevance of s 60 the Court said at [39]:

Submissions for the Defendant

1. [106]

   The defendant advanced the following submissions in favour of leave being refused:

   1. (1)

      The clearly expressed legislative intention is for appeals involving amounts less than $100,000 to be heard in the District Court, unless leave is granted. In this matter the amount of costs in dispute is $46,152.70. Relative to that amount, the costs of the appeal are likely to be substantial. There is no compelling reason why leave should be granted in this Court. Consideration should be given to ss 56 and 60 of the Civil Procedure Act, and particularly the issue of proportionality.

   2. (2)

      The District Court has had jurisdiction in relation to appeals from review panels since 2004 (under the Legal Profession Act 2004 (NSW) (since repealed) and continues to have jurisdiction under the Application Act, including in appeals where the amount in dispute is over $100,000. The District Court is the more appropriate forum. Thus, there has been a general repository of jurisdiction in the District Court since 2004 in exercising the jurisdiction to deal with appeals from review panels.

   3. (3)

      The giving of leave in this Court would encourage parties in future to skip the jurisdiction of the District Court in matters under $100,000 and would subvert the legislative intention for such appeals to be heard there. There has been a general reluctance in the Court of Appeal to grant leave when the matter is under the jurisdictional limit unless there is a good reason to do so, particularly when, as in this case, the Court would then exercise the powers of the review panel (see s 89(2) of the Application Act).

   4. (4)

      The plaintiff contends that leave should be granted because, inter alia, the District Court does not have power to grant order 3 of the Amended Summons. The implication is that the Supreme Court would have the power to make order 3, That is incorrect: neither the District Court nor the Supreme Court has power to make order 3; to do so would be to act in excess of jurisdiction. Both the Supreme Court and the District Court have the same power as a costs assessor and a review panel: s 89(2). The Supreme Court has additional powers to remit a matter to the District Court: s 89(3) or to remove a matter from the District Court into the Supreme Court: s 89(3A). Accordingly, the reason given in the Amended Summons as to power does not provide a cogent reason why leave should be granted.

   5. (5)

      The combination of those factors against the grant of leave is illustrated by issue 4. This would require the Court to examine the line by line determination made by the costs assessor to determine whether they are fair and reasonable because it was submitted by the plaintiff that the costs assessor erred in conducting a line by line determination.

Submissions for the Plaintiff

1. [107]

   In written submissions in reply, the plaintiff made the following submissions in favour of the grant of leave

2. [108]

   In oral submissions, Mr D McLure SC, for the plaintiff, contended that it was consistent with s 56 of the Civil Procedure Act for the Court to fully resolve all controversies between the parties. If there is a legal error by the review panel then the question of proportionality does not support the refusal of leave because the issue arising as to the construction of s 174(3) will have to be dealt with “elsewhere” with the further expedition of costs and time. This would be contrary to the proper administration of justice.

Consideration

1. [109]

   I consider that leave should not be granted under s 89(1)(b) to bring the appeal for the following reasons.

2. [110]

   First, the principal basis for the grant of leave advanced by the plaintiff was that there was an error of law by the costs assessor and the review panel (whether explicitly or implicitly made) in the construction of s 174(3) and, in particular, finding that s 174(3) was a disclosure obligation for the purposes of s 178(1) of the Uniform Law.

3. [111]

   The issue raised by the plaintiff in that respect by issue 1 (as it appears at [42(1)] of the judgment) has been answered in the affirmative, contrary to the contentions advanced by the plaintiff.

4. [112]

   Secondly, the grounds arising out of issues 2, 3 and 4 raise no error of principle, matters of public importance or injustice and certainly none which are reasonably clear in the sense of going beyond what is merely arguable. The plaintiff raised an issue of law with respect to issue 3, but the plaintiff’s contention as to the disapplication effect of r 72A in the present case lacks merit and the contention that there was an error of law in that respect is weak and may be doubted.

5. [113]

   As to issue 2 and as a matter of principle, the following contention by the plaintiff as to the nature of the requirements imposed by s 174(3) may be accepted:

6. [114]

   However, that description immediately confirms the absence of the factors of the kind referred to in this second reason.

7. [115]

   Further, the contentions of the plaintiff as to why that obligation had been met essentially concerned the nature and quality of the information provided to the defendant: the disclosure obligations under s 174(1), (2) and (6) had been met; the information, so supplied was clear and concise; the defendant acknowledged he had read understood and agreed to the costs agreement; he had an opportunity to seek legal advice and did so (including querying the rates); he had previously entered into a costs agreement and that there was evidence that he recognised the lump sum he was to be paid. Part of the contested evidence is that Mr Firth satisfied himself that the defendant understood what the cost agreement entailed (the affidavit of Mr Firth at paras 30 and 38-39).

8. [116]

   However, I accept the submissions of the defendant that there is no evidence that the defendant was informed as to the risks occasioned by a fixed price agreement. As Ms M Castle, who appeared with Mr A Bailey for the defendant, properly contended, the risks went both ways but the risks for the defendant are twofold. First, there is a risk that the legal practice may be incentivised to minimise the work contributed to a particular matter. Secondly, and more significantly, there was a risk that the client will pay more than a matter is objectively worth under such an agreement, even if the discounts under the costs agreement were applied. Mr Firth’s assessment was, in essence, that he surmised the client understood and consented from the surrounding circumstances and the client’s communications and that, if asked, he would have dealt with any query in that respect. Accepting the client was debating his legal fees and seeking legal advice (of some kind) elsewhere, the taking of that approach does not constitute reasonable steps to satisfy himself the client had understood and given consent to proposed costs, when formulated on a fixed price basis, let alone, the proposed course of action for the conduct of the matter in that light. No inquiry was made as such of the client as to his understanding or consent specifically in relation to the fixed price component of the costs agreement and its implications in the context of the specific litigation under consideration.

9. [117]

   As to issue 3, whilst the plaintiff submitted that the omission of the review panel to consider the interaction between r 72A and s 178(1) constituted an error of law, warranting the grant of leave, the merits of the plaintiff’s case for disapplication under r 72A are, in any event, weak.

10. [118]

    In substance, the plaintiff contended that:

    1. (1)

       The factors relied upon to demonstrate that the provisions of s 174(3) had been complied with by the law practice demonstrated, with greater force, why disapplication would be granted. There was an honest and rational basis for the principal of the law practice to believe the defendant understood.

    2. (2)

       Rule 72A(2)(b) was not relevant as the plaintiff and Mr Firth could not be said to have become aware of the contravention until the cost assessor’s determination (it was said the contravention of r 72A(2)(c) was not substantial).

11. [119]

    I do not accept these submissions. On the construction of r 72A(2) undertaken with respect to issue 1, in order to attract the ameliorating effects of that provision the plaintiff was required to take reasonable steps to comply. The defendant took no steps in rectification.

12. [120]

    Further, as the defendant contended, reliance cannot properly be placed upon a contention that the law practice was not aware until a costs assessment arose where there has been an active denial by the law practice that the obligation existed. The law practice’s position was not mere inadvertence or oversight when seen in the light of the plaintiff’s case (even though propositions advanced before the Court are advanced in succession).

13. [121]

    It is not entirely clear why the plaintiff contends that the standard required to meet the duty under r 72A(2)(a) must be lower than the standard imposed under s 174(3).

14. [122]

    Ultimately, the contention that a law practice took reasonable steps is a contention of fact.

15. [123]

    The costs assessor found that the plaintiff had taken no time to explain how $80,000 might be considered fair, reasonable or proportionate. There is no proper basis demonstrated for the purposes of leave to traverse such a finding, particularly when the contention is advanced in circumstances when the disapplication provisions of r 72A(2) were not relied upon by the plaintiff before either the costs assessor or the review panel: eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (2015) 90 NSWLR 451; [2015] NSWCA 284 at [5] (per Beazley P), [47]-[49] (per Basten JA) and [108] and [112] (per Simpson JA).

16. [124]

    The provision is concerned with affecting compliance. The reasonable steps concern the actions to achieve the same. It is not clear what steps relied upon with respect to issue 2 meet this condition given that the provision is triggered in circumstances of contravention. In any event, the conclusions reached with respect to issue 2 below, demonstrate why, in addition to the above analysis, the provision of r 72A(2) may not be satisfied.

17. [125]

    Finally, in relation to this issue, there is substance in the defendant’s submission, having regard to the above conclusions, that r 72A was not engaged.

18. [126]

    Thirdly, the issue raised by question 4 is predicated upon a finding that, contrary to my earlier conclusion, there is a valid costs agreement. Further, I accept the submissions advanced by the defendant that issue 4 does not raise a valid ground of appeal, does not arise in the proceedings and any judgment in respect of it would constitute, in substance, an advisory opinion: Bass at [47]-[48].

19. [127]

    I also accept the submission that the inquiry raised by the defendant would, in substance, have the Court undertake a line by line assessment of costs. Whilst the legislation provides that the Court has “all of the functions of the review panel”, this is a relevant discretionary consideration against the grant of leave in that respect.

20. [128]

    Fourthly, it is necessary to consider the cost assessor’s conclusion under s 199 of the Uniform Law given the conclusions I have reached regarding the operation of s 174(3).

21. [129]

    Fifthly, as to the submission of the plaintiff that only this Court may remit a matter to the review panel, it would appear the power of this Court is confined under s 89(3) to a remitter to the District Court. The Court may otherwise exercise the same power as the review panel.

22. [130]

    Sixthly, the clearly expressed legislative intention is for appeals involving amounts less than $100,000 to be heard in the District Court, unless leave is granted. In this matter the amount of costs in dispute is small, namely, $46,152.70. Relative to that amount, the costs of the appeal are likely to be substantial. For the reasons I have given, there is no substantial reason why leave should be granted in this Court either as a matter of law, principle, justice or merit. The conclusion to refuse leave is properly informed, in my view, by ss 56 and 60 of the Civil Procedure Act, particularly the issue of proportionality.

Conclusion

1. [131]

   In all of the circumstances, leave to appeal under s 89(1)(b) of the Application Act is refused.

ORDERS

1. [132]

   The Court makes the following orders:

   1. (1)

      Leave to appeal is refused.

   2. (2)

      The defendant shall have costs of the appeal as agreed or as assessed.