Bolton v Atanaskovic Hartnell

These proceedings are brought pursuant to s 89 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPULAA) which provides for an appeal to the Supreme Court against a costs assessment in the circumstances specified in that provision.

The dispute arises out of legal services which a firm of solicitors, Atanaskovic Hartnell (Firm), provided to a company called Australian Style Holdings Pty Ltd (ASH) up until July 2018. The fair and reasonable costs for those services are roughly $300,000. Nicholas Bolton is associated with ASH. On 5 April 2018, Mr Bolton entered into an agreement with the Firm in which, amongst other things, he promised personally to pay the Firm’s professional costs and disbursements for acting for ASH.

When making the agreement with Mr Bolton, the Firm was required to make certain disclosures about costs under Div 3 of Part 4.3 of the Legal Profession Uniform Law 2014 (NSW) (LPUL). The Firm failed to do so. The consequences of the failure are set out in the LPUL. Specifically, Mr Bolton contends that the effect of s 178(1)(a) is that he has no liability to pay any costs to the Firm. The Firm contends otherwise.

Unable to agree, these proceedings are brought to determine the operation of s 178(1)(a) and related issues.

In order to understand the issues, it is necessary to know some details about the parties’ dealings with each other. The following narrative is not controversial.

As at 2012, there existed a trust called the Australian Style Investment Unit Trust (Trust). The trustee was Australian Style Investments Pty Ltd, although that subsequently changed.

At all times Mr Bolton has had a connection with the Trust and each of the successive corporate trustees. The precise nature of that connection is addressed only incidentally in the evidence. Originally, Mr Bolton was the sole director of the trustee but in October 2015 he was disqualified from managing corporations. He was replaced by his father, John Peter Bolton. As at April 2018, Mr Bolton owned one of the 100 issued shares in the then trustee, ASH, with the other 99 shares being owned by Georgina Hearnden Bolton. The relationship between Georgina and Mr Bolton is unknown. There is a reference to Mr Bolton being a beneficiary of the Trust, although the trust deed is not in evidence and, apart from what may be inferred from the inclusion of the word “unit” in the name of the Trust, it is not known what benefits and interests would flow to Mr Bolton as a beneficiary if that was in fact the case. Mr Bolton regarded the Firm’s provision of legal services to the trustee as “important to me”.

In September 2012, the then trustee retained the Firm to provide it with legal services in relation to a claim the trustee wanted to bring against a third party arising from an investment made on behalf of the Trust.

On 6 November 2015 the previous trustee was replaced by ASH as trustee of the Trust.

On 11 November 2015 ASH commenced proceedings against the third party. The Firm acted for ASH. It ceased acting for ASH in May 2016 due to unpaid fees. It recommenced acting in October 2016 but on 20 November 2017 it once again ceased to act due to unpaid fees. At that time, there were about $280,000 in outstanding fees owed to the Firm.

After some communications, on 5 April 2018 the Firm sent a letter to Mr Bolton which he countersigned and returned on the same day. This is the key document in the case. I will refer to it as the “Bolton Agreement”.

Addressed to Mr Bolton personally and entitled “Engagement Letter”, the first sentences in the Bolton Agreement were as follows:

The Bolton Agreement went on to describe a proposed course of action to progress the litigation, list the hourly rates for certain lawyers and provide an estimate of costs. The Bolton Agreement also provided for certain payments to be made by Mr Bolton in relation to outstanding fees and for billing arrangements for future fees.

In par 7 of the Bolton Agreement, Mr Bolton promised to pay certain outstanding fees in accordance with a specified schedule.

Paragraph 8 provided as follows:

Attached to the Bolton Agreement and incorporated by reference were two documents, one of which was entitled “Standard Terms of Engagement” and the other “Disclosures Under Legal Profession Uniform Law 2014 (NSW)”. The first sentence of this last document stated:

Although the third paragraph of the Bolton Agreement stated that the disclosures required by the LPUL were included in the letter, as I have said above, the disclosures were deficient and there is no further dispute about that.

There is no dispute that upon entering into the Bolton Agreement, Mr Bolton became an “associated third party payer” as defined in ss 171(1)(a) and (b) of the LPUL. I will use the acronym “ATPP” when referring to “associated third party payer” below.

On 23 April 2018, the Firm entered into an agreement with ASH about the Firm’s fees for the provision of legal services to continue the proceedings against the third party. On behalf of ASH, the agreement was executed by Richard Dukes who had by then become the director of ASH. The evidence does not address the relationship between Mr Bolton and Mr Dukes, if any.

Between April 2018 and July 2018, the Firm undertook further work and billed ASH a further $87,533.20. During this period, some payments were made to the Firm, but the evidence does not address the amount of the payments and how they were applied as between the newly billed costs and the costs which were outstanding from before April 2018.

On 9 July 2018, the Firm once again terminated its retainer due to unpaid fees. It never again acted for ASH.

On 23 December 2019, the Firm commenced District Court proceedings to recover the unpaid fees. The defendants included ASH and Mr Bolton.

On 11 October 2021, ASH and Mr Bolton filed an application for the assessment of the Firm’s costs. In the papers lodged with the costs assessor, one of the objections made by ASH and Mr Bolton was that the Firm had failed to comply with its disclosure obligations under ss 174(1)(a) and 176 of the LPUL. Mr Bolton submitted that the consequence of that failure was that the Bolton Agreement was “void” under s 178(1)(a).

On 29 April 2022, the costs assessor determined that the Firm had failed to comply with its disclosure obligations under ss 174(1)(a) and 176 and that the Bolton Agreement was “void”. The costs assessor concluded that Mr Bolton was therefore not liable to pay any of the costs claimed by the Firm.

On 29 June 2022 the Firm applied for a review. Apart from disputing that there had been a failure to comply with the Firm’s disclosure obligations, the Firm alternatively contended that it was entitled to recover costs from Mr Bolton even if the Bolton Agreement was “void” under s 178(1)(a). The Firm’s submissions to the review panel do not make clear the precise basis or bases upon which that alternative contention was made. It is unclear whether the Firm contended that, even if void, the Bolton Agreement had residual contractual effect or that s 178 (1)(b) of the LPUL created a free-standing statutory right to the payment of any costs which were assessed to be fair and reasonable even if there was no valid contract. In any event, the Firm further contended that it had a right to be paid by Mr Bolton on a quantum meruit.

Originally, Gadens represented Mr Bolton in the review proceedings. That retainer did not go the distance. On 2 March 2023, a solicitor at Gadens sent an email to the review panel (and copied the Firm) in which she stated that Gadens no longer acted for Mr Bolton and provided an email address for Mr Bolton: “@keybridge.com.au”. The review panel then sent an email to Mr Bolton (and copied the Firm) and stated that all future communications would be sent to him directly via email.

On 24 March 2023, the review panel determined the review. It held that the Firm was entitled to recover from Mr Bolton the costs which had been assessed to be fair and reasonable (as to the quantum of which there was no longer any dispute). The reasons given by the review panel lack clarity, but it appears that the review panel found that the Bolton Agreement, although void, had a residual contractual operation which meant that Mr Bolton’s promise to pay the Firm’s fees could still be enforced. The review panel rejected the Firm’s contention that Mr Bolton would alternatively have a liability on a quantum meruit.

Hence, the review panel issued certificates to substitute those originally issued by the costs assessor, including a certificate which required Mr Bolton to pay the costs of the review panel.

The mechanism by which a review panel finalises and documents its determination and reveals it to the parties is set out in the LPULA. For current purposes, cl 54 of the Legal Profession Uniform Law Application Regulation 2015 applies to the case where (as here) the review panel issues a certificate requiring the payment of the review panel’s costs by one or both of the parties. In such a case, the review panel must forward all the certificates to the Costs Manager of the Court instead of forwarding them directly to the parties. The review panel must also advise the parties that the certificates have been forwarded to the Costs Manager “and will be available to the parties on payment of the costs of the panel”.

Consistent with that mechanism, on 24 March 2023 one of the members of the review panel sent an email to Mr Bolton and the Firm which read:

Mr Bolton took no steps to pay the review panel’s costs or obtain the determination or the substitute certificates.

It may be inferred that shortly before 12 May 2023 the Firm paid the costs of the review panel. On 12 May 2023, the Costs Manager sent the review panel’s determination and substitute certificates by way of an email addressed to the Firm and to a solicitor at Gadens. Mr Bolton claims that the email was not sent to him personally and there is no evidence to suggest otherwise.

On the same day, the solicitor at Gadens on-forwarded the documents to Anthony Loizou. Mr Loizou’s position and relationship with Mr Bolton is not precisely clear. His email address is also “@keybridge” and he described himself as an Australian lawyer when witnessing the affirmation of one of Mr Bolton’s affidavits in these proceedings. Why Gadens sent the documents to Mr Loizou and not Mr Bolton is not known. Gaden’s covering email to Mr Loizou stated:

On 19 May 2023, the Firm filed the certificates issued by the review panel in the District Court and thereby obtained a judgment against Mr Bolton for $308,949.19.

On 27 September 2023, a bankruptcy notice was served on Mr Bolton which was based on the District Court judgment. Mr Bolton became aware of the bankruptcy notice on or about that date. This was the first indication Mr Bolton received that the review panel had found in favour of the Firm and issued certificates under which Mr Bolton was liable to pay money to the Firm. This was also the first knowledge Mr Bolton had of the District Court judgment.

On 20 October 2023, Mr Bolton commenced these proceedings in which he challenges the determination of the review panel and seeks an order setting aside the certificates issued by the review panel on 24 March 2023.

As stated above, Mr Bolton brings these proceedings under s 89 of the LPULAA. Section 89 provides:

As provided in s 89(4), the appeal is by way of rehearing. For such an appeal, the powers of the Court are exercisable where the appellant can demonstrate that, having regard to all the evidence now before the Court, the order that is the subject of the appeal is the result of some legal, factual or discretionary error. If an error is demonstrated, the Court can substitute its own decision based on the facts and the law as they now stand: Allesch v Maunz [2000] HCA 40 at [23] (Gaudron, McHugh, Gummow and Hayne JJ).

Section 75A of the Supreme Court Act 1970 (NSW) applies to an appeal to the court. Subsections 75A(6) and (10) provide:

By virtue of these provisions, together with s 89(2) of the LPULAA, the Court has the power to set aside certificates issued by the review panel and to affirm the certificates originally issued by the costs assessor if the Court finds any relevant error in the determination by the review panel.

Part 50 of the Uniform Civil Procedure Rules 2005 (UCPR) contains rules for appeals to the Supreme Court. The time in which an appeal must be commenced is set out in UCPR 50.3, which provides as follows:

The term “material date” is defined in UCPR 50.2(1) as follows:

The assessment process which the parties have already undertaken has resulted in the resolution of a number of matters which were previously in dispute. In particular, there is no longer any dispute that the Firm contravened its costs disclosure obligations under ss 174(1)(a) and 176 of the LPUL at the time the Bolton Agreement was entered into. Further, there is no longer any dispute about the quantum of the fair and reasonable costs for the legal services provided by the Firm to ASH and which remain unpaid.

The following issues remain to be decided to determine the claim for relief made by Mr Bolton in his Summons:

As set out above, UCPR 50.3 required Mr Bolton’s Summons to be filed within 28 days after the “material date”. Under the definition in UCPR 50.2, the material date for a body such as the review panel is the date “on which notice of the decision was given, by or on behalf of the person or body who made the decision, to the person who wishes to appeal”. A number of matters ought to be noted about the definition.

First, the “material date” is the trigger for the commencement of the 28 days in which a person who wishes to appeal must file a summons. It presupposes that there is a person who “wishes” to appeal. In order for such a time limit to be both efficacious and procedurally fair, the purpose of the definition of “material date” is evidently to identify the occasion when the appellant becomes aware, or would ordinarily become aware, of his or her wish to appeal.

Secondly, the thing of which notice must be given is the “decision”. That word is defined in UCPR 50.2 (1) to include “a judgment, order, opinion, direction or determination”. Consistent with the purpose identified in the preceding paragraph, it is clear that notice must be given of the orders (or equivalent) that were made for the material date to occur. Appeals are brought from orders and not from reasons. The person must be aware of the orders before he or she can decide whether he or she wishes to appeal. It is not sufficient that notice is given of the fact that a final determination has been made, or the general outcome, or even the detailed reasons if notice is not also given of the actual orders which have been made. As Basten AJA said in another context, “procedural fairness requires that the party adversely affected by the judgment must have some notice of the form of the judgment and time within which to seek to have it set aside”: Bingham v Bevan (2023) 111 NSWLR 287; [2023] NSWCA 86 at 293, [29]).

Thirdly, the material date for a decision of a body such as the review panel is to be contrasted with the material date for a decision of a court. Under the definition in UCPR 50.2(1), the material date for a court is the date on which the decision is pronounced or given by the court. There is no requirement to give the decision to the party who wishes to appeal. Given the different procedures of courts and the fact that courts are open and not private, a pronouncement or the giving of orders by a court would ordinarily be sufficient to ensure that a person who may wish to appeal is aware of the orders. It is different for other bodies, such as costs assessors, before whom the proceedings are essentially private.

Against that background, the text of the definition of “material date” identifies both the person or body which must give the notice and the person to whom the notice must be given. In this regard,

Turning then to the facts in this case. The relevant “decision” was the finding by the review panel that the certificates issued by the costs assessor on 29 April 2022 were to be set arise and substituted with the review panel’s own certificates. The “decision” was recorded in par 70 of the Reasons for Determination of the Costs on Review dated 24 March 2024 and formally constituted by the two substitute certificates issued by the review panel on that date.

The person or body who made the decision was the review panel. On 24 March 2023, the review panel gave Mr Bolton the information set out in the email referred to above. Although that email informed Mr Bolton that the review panel had completed its review and that certificates have been forwarded to the Costs Manager, it did not reveal the overall outcome of the review, let alone the terms of the substitute certificates. The email informed the parties that the costs of the review panel had to be paid, but it did not inform them which party or parties had to pay the costs.

The Firm nonetheless submitted that by virtue of the review panel’s email, the “material date” was 24 March 2023. The Firm argued that it was sufficient to inform the parties that the determination had been made and it was not necessary to reveal the outcome. For the reasons set out above, I do not accept that submission. It does not accord with the plain meaning of the words in the definition in UCPR 50.2, particularly the word “decision”. Nor does it accord with the purpose of the definition of “material date” because, if correct, the 28-day time limit could begin to run at a time when the person who wishes to appeal is still unaware of the decision.

For appeals from costs review panels, the operation of UCPR 50.3 for which the Firm contends would also give rise to a regime under which a person would (if able) have to pay the entire costs of the review panel before placing himself or herself in a position to decide whether to appeal. Whilst it may be possible for the person to recoup any part of the costs which he or she had not been ordered to pay, the impracticality of such a regime is readily apparent. UCPR 50.2 and 50.3 do not only apply to appeals from costs review panels under the LPULAA. They apply to all appeals to the Court other than those excluded by UCPR 50.1. The construction of “decision” and “material date” is not therefore to be determined by reference to the operation of the regime in the particular case of appeals from costs review panels. Nonetheless, the difficulty created for the LPULAA regime by the Firm’s construction of UCPR 50.2 highlights the unfairness of a construction which may trigger the 28-day period to run before the parties become aware of the orders. An alternative construction is available, and it is to be preferred. The email dated 24 March 2024 did not give the “decision” to Mr Bolton and it did not trigger the “material date”.

Having received it from the review panel, on 12 May 2023 the Costs Manager gave the decision to Gadens. It may be assumed that in doing so the Costs Manager gave the decision “on behalf of” the review panel. The question whether giving the decision to a solicitor acting for the person who wishes to appeal is sufficient for the purposes of the definition of “material date” does not arise in this case because by 12 May 2023 Gadens no longer acted for Mr Bolton. There may be circumstances in which the Costs Manager might have been entitled to assume otherwise but in this case the Firm does not contend that by giving the decision to Gadens the decision was given to Mr Bolton for the purposes of the definition of “material date”.

What the Firm does alternatively contend, albeit faintly, is that the material date occurred on 12 May 2023 because Gadens forwarded the decision to Mr Loizou at Keybridge. I do not accept that submission either. For the purposes of the definition of “material date”, the decision had to be given to Mr Bolton. That did not occur. The evidence does not establish enough about the connection between Mr Loizou and Mr Bolton for the Court to find that Mr Loizou received the decision on behalf of Mr Bolton, even if such a receipt would fall within the definition of “material date”.

Having rejected the Firm’s contentions for 24 March 2023 and 12 May 2023, it is unnecessary to make a finding about specifically when the material date occurred. It may never have occurred. Mr Bolton nonetheless received the decision for the first time on or about 27 September 2023 when he received the bankruptcy notice. What can be said is that the material date did not occur more than 28 days before Mr Bolton filed the Summons to commence these proceedings on 20 October 2023. The proceedings were commenced in accordance with UCPR 50.3 and Mr Bolton does not require an extension of time.

The Firm made a number of submissions about Mr Bolton’s lack of curiosity about the outcome of the review panel, particularly after 24 March 2023 when the review panel informed Mr Bolton that the review was complete. There is nothing in UCPR 50.3 or the definition of “material date” which makes the commencement of the 28-day period contingent upon the curiosity or diligence of the person who subsequently wishes to appeal. In any event, given that Mr Bolton was the respondent before the review panel, there was nothing in his conduct which ought to disentitle him from his right to have 28 days to consider an appeal under s 89 of the LPULAA.

UCPR 50.3(1)(c) contemplates that the Court may allow more than 28 days for a summons to be filed to commence an appeal. Under UCPR 50.3(2) an application for an extension of time must be included in the summons commencing the appeal. Mr Bolton has included Prayer 3 in his Summons by which he seeks an extension of time against the possibility that it is found that the “material date” occurred more than 28 days before the Summons was filed.

In view of my finding above, it is not necessary for Mr Bolton to be granted an extension of time. Had it been necessary, I would have granted an extension. At the time the Summons was filed, Mr Bolton should be taken to have had grounds of appeal which were reasonably arguable having regard to the disagreement between the costs assessor and the review panel, not to mention the reasoning in the first instance judgment in Bevan v Bingham [2022] NSWSC 863 which, in 2023, had not yet been overturned.

In the context of the parties’ long-running costs dispute, the delay was relatively short and there were reasons for the delay which did not detract from the merit of the application for an extension of time. In his Affidavit affirmed on 20 October 2023, Mr Bolton says that, between receiving the email from the review panel on 24 March 2023 and being served with the bankruptcy notice on 27 September 2023, he heard nothing about the completion of the review or the issuing of substitute certificates. The Firm emphasised some aspects of the narrative which were said to undermine the plausibility of Mr Bolton’s evidence, but Mr Bolton was not cross-examined, and, in those circumstances, I accept his evidence. The Firm again submitted that Mr Bolton demonstrated a lack of curiosity but, as I have said above, there is nothing untoward in Mr Bolton’s conduct given that he was the respondent to the review who was perfectly happy with the status quo.

The apparent cause of the delay in Mr Bolton being given the review panel’s decision was the fact that the Costs Manager emailed the decision to Gadens on 12 May 2023 rather than to Mr Bolton personally. The mechanism by which the decision of the review panel would ordinarily be provided to both parties broke down at that point. Gadens had taken steps to ensure that the review panel was aware that it had ceased to act for Mr Bolton. It may be inferred that no one told the Costs Manager, including the review panel, Gadens or Mr Bolton personally. I am not suggesting that the review panel had an obligation to inform the Costs Manager, but once Gadens had informed the review panel there is no basis in the evidence to blame Mr Bolton or Gadens for the Costs Manager’s ignorance thereafter. The Firm did not submit otherwise.

The Firm submitted that it would suffer prejudice if time were now to be extended because it took steps and incurred expenses to enforce the review panel’s substitute certificates before Mr Bolton filed his Summons. The evidence shows that the Firm did two things after 12 May 2023, the first of which was to file the substitute certificates with the District Court on 19 May 2023. I do not consider that any expense arising from that particular action is relevant prejudice. The Firm filed the certificates seven days after receiving the decision from the Costs Manager. Even on its own alternative case, that was less than the 28 days which Mr Bolton had to appeal under UCPR 50.3. The Firm therefore should be taken to have accepted the risk that the expense of the District Court filing might subsequently be wasted if Mr Bolton decided to appeal.

The second thing which the Firm did was to arrange for the bankruptcy notice to be issued and served, which happened on or about 27 September 2023. Although some expense may have been involved in taking that action, any such expense would have been immaterial in the context of Mr Bolton now wishing to bring an appeal against certificates for costs in amounts of roughly $300,000. Further, the Firm did not notify Mr Bolton that the Firm had filed the substitute certificates with the District Court and a judgment had thereby been obtained. No explanation was given as to why the Firm did not notify Mr Bolton of these matters. It may be accepted that the Firm was not under any legal obligation to notify Mr Bolton, but it would have been a good idea. It would have been prudent to tell Mr Bolton because the Firm would thereby have been able to avoid wasted expense if Mr Bolton decided to appeal when he discovered the District Court judgment. It would also have been able to avoid wasted time, not only for itself and Mr Bolton, but also for the Court. The Firm’s decision not to notify Mr Bolton is the real cause of any expense wasted by the bankruptcy notice having been issued. It is not prejudice which may now be called on by the Firm to deprive Mr Bolton of an extension of time.

Having regard to all these matters, if it had been necessary, I would have granted Mr Bolton an extension of time to file the Summons to commence these proceedings. I will make the necessary order under UCPR 50.3(1)(c) in case I am wrong about the first issue, but the making of that order will not affect the exercise of my discretion on the question of the costs of these proceedings.

Turning then to the substantive issues, the (now) undisputed fact that the Firm contravened its costs disclosure obligations at the time the Bolton Agreement was entered into requires a consideration of the consequences specified in Part 4.3 of the LPUL.

Before considering the consequences, the nature and content of costs agreements need to be identified. The starting place is a question of construction about the meaning of the term “costs agreement” as it is used in Part 4.3 of the LPUL.

The word “agreement” is well understood and is, in any event, confirmed by s 184 of the LPUL which provides:

The word “agreement” is qualified by the word “costs”. The intent of the qualification is not specified other than by that which is implicit in the word “costs” itself. Within Part 4.3 (including the definitions in s 6), the composite term “costs agreement” is not defined. However, “costs agreements” are alluded to. Provision is made for five specific aspects of the content of costs agreements:

These references, various and limited as they are, make it difficult to distil an exhaustive definition of what is a “costs agreement” for the purposes of Part 4.3. In Anderson v Hill [2017] NSWSC 1149 at [35], Hallen J said that “costs agreement” simply means an agreement about the payment of legal costs, although Anderson v Hill was a case which was relevantly concerned with the adequacy of disclosure to the Court of a party’s potential costs liability for the purposes of family provision. It was not concerned with the operation of Part 4.3 of the LPUL. Bevan v Bingham was a case which was concerned with the operation of Part 4.3 and s 178(1)(a) in particular, in which Walton J referred to Hallen J’s description with apparent approval. It does not follow that every agreement “about costs” is a costs agreement for the purposes of Part 4.3, nor that every provision in such an agreement is part of the costs agreement.

Further illumination of the meaning of “costs agreement” comes from a consideration of the purposes of Part 4.3, which are apparent from s 169:

Within Part 4.3 there are six substantive Divisions which address legal costs generally, costs disclosure, costs agreements, billing, unpaid legal costs and costs assessment. In Carkeek v Aubrey F Crawley & Co [2024] NSWSC 86 at [24]-[25], Fagan J said:

Part 4.3’s concern with quantification is apparent from the provisions in Part 4.3 read as a whole. At a high level they are directed to an amount which is fair and reasonable (eg, s 172(1)), what must be disclosed by the law practice (eg, s 174) and how the legal costs are to be definitively quantified if the parties cannot agree. The focus on quantification also accords with the s 169 objectives set out above.

Read in context, and having regard to the purposes of Part 4.3, a costs agreement is an agreement which addresses the quantification of the legal costs which are payable to the law practice. More particularly, a costs agreement is not concerned with the anterior legal obligation of the client to pay the legal costs once quantified: Carkeek v Aubrey F Crawley & Co at [24] and [42] (Fagan J).

A Part 4.3 costs agreement is not the same thing as the client’s contract of retainer which arises where the law practice is retained: Carkeek v Aubrey F Crawley & Co at [36] and [42]. Part 4.3 makes clear that they are intended to be discrete, with the former the subject of regulation under Part 4.3 and the latter only incidentally referred to. “After instructions are initially given in a matter”, the law practice must inform the client that it has a right to negotiate a costs agreement with the law practice (ss 174(1)(a) and 174(2)(i)). The client has “the right to require and to have a negotiated costs agreement” (s 179), but there is no obligation. For the provision of particular legal services, there must be a retainer but there may or may not be a costs agreement. Section 178(1)(a) recognises that there may be no costs agreement when it provides that the thing which is rendered void is the costs agreement “if any”.

The distinction between the retainer and the Part 4.3 costs agreement was recognised in Bingham v Bevan. That was a case where a costs agreement between a solicitor and a barrister contained a provision by which the solicitor’s obligation to pay the barrister’s legal costs was made conditional upon success. The costs agreement was “void” under s 178(1)(a), yet the solicitor’s anterior obligation to pay the barrister’s costs continued. Basten AJA, with whom Meagher & White JJA agreed, evidently regarded the anterior payment obligation to have subsisted in contract: at 297, [46], Basten AJA said:

The distinction between the retainer (“a contract for the provision of legal services”) and the costs agreement was also apparent under the Legal Profession Act 1987 (NSW) and the Legal Profession Act 2004 (NSW), in each case in accordance with the different provisions of those statutes: Branson v Tucker [2012] NSWCA 310 at [68]-[69] (Campbell JA with whom Beazley and Barrett JJA agreed). The current statute, the LPUL, is not intended to operate to conflate the two distinct concepts.

The survival of the retainer and the law practice’s entitlement to be paid under the retainer avoids the possibility that there will be an unpaid worker, which outcome was described as “draconian” by Mason and Wilson JJ in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 229. Absent agreement on quantum, the worker’s entitlement to be paid will be limited to reasonable fees which, by definition, are reasonable: Branson v Tucker at [83]; Champion Homes Sales Pty Limited v DCT Projects Pty Limited [2015] NSWSC 616 at [134]-[135]; K Lewinson and D Hughes, The Interpretation of Contracts in Australia (2012) at 6.16. It is not necessary to construe s 178(1)(a) so that it denies the legal effect of the client’s obligation to pay under the retainer. Section 178(1)(a) is open to another construction, namely that it applies only to the costs agreement and not to the retainer.

Carkeek v Aubrey F Crawley & Co was a case primarily about a client which (it was alleged) had a retainer with the law practice. In the case of an ATPP, the provisions of Part 4.3 no less proceed on the assumption that the ATPP is liable to pay the law practice’s costs. The term “third party payer” is relevantly defined as a person who “is under a legal obligation to pay all or any part of the legal costs for the legal services provided to the client” (s 171(1)(a)). The third party payer is an ATPP if the legal obligation “is owed to the law practice” (s 171(1)(b)).

There will be no retainer between the law practice and the ATPP because the ATPP is, by definition, not the client (s 171(1)(a)). The definitional relationship between the ATPP and the law practice is the legal obligation which the ATPP owes the law practice to pay the legal costs for the legal services provided to the client. The legal obligation may arise under a contract (s 171(2)). For example, it may arise under a general guarantee and indemnity granted by the ATPP to the law practice. The ATPP may also have a costs agreement with the law practice (s 180(1)(d)) but it may not (s 178(1)(a) – “if any”). For the purposes of Part 4.3, any such costs agreement is distinct from the contract which records the ATPP’s anterior obligation to pay the legal costs to the law practice.

As a practical matter, the law practice and the client may record their agreement about the retainer in the same document which addresses the quantification of costs, including some or all of the specific provisions referred to in [68] above. The law practice and the ATPP may do the same. The fact that a single document contains provisions about the quantification of costs does not mean that every provision in the document is part of the costs agreement for the purposes of Part 4.3: Carkeek v Aubrey F Crawley & at [36]. Contrary to Mr Bolton’s submission, no issue arises about the review panel needing power to “splice out” parts of a single document. The relevant issue is to identify the provisions which constitute the “costs agreement” for the purposes of Part 4.3.

Having identified the “costs agreement”, the consequences of the Firm’s failure to comply with its costs disclosure obligations in Div 3 of Part 4.3 can be considered. The first consequence arises from s 172 which provides:

Under s 172(4), a costs agreement is prima facie evidence that legal costs disclosed in the agreement are fair and reasonable, but only if the provisions of Div 3 relating to costs disclosure have been complied with. It follows that the Bolton Agreement is not prima facie evidence that the legal costs disclosed in it are fair and reasonable.

Further consequences of non-compliance are set out in s 178. Section 178 provides:

The thing which is rendered void by s 178(1)(a) is “the costs agreement concerned (if any)”. Section 178(1)(a) is not intended to affect the retainer. Were it otherwise, significant disruption may occur. Amongst other things, there may be implications for the law practice’s obligation to continue to act, the implied duty of care, the fiduciary duty of loyalty which is coterminous with the retainer, confidentiality, privilege, agency, authority and representation before the Court. If it is intended to interfere with the retainer, the clearest possible words would be required, which words do not appear in s 178(1)(a).

Where the retainer and the costs agreement are recorded in a single document, the consequence is that some provisions will be rendered void by s 178(1)(a) but not others. In the case of a client, provisions which establish the retainer and the client’s anterior obligation to pay the law practice’s legal costs are not rendered void by s 178(1)(a): Carkeek v Aubrey F Crawley & Co at [42]-[43].

As for the ATPP, there is nothing in s 178(1)(a) which reveals an intention to affect any anterior contractual obligation of the ATPP to pay the client’s legal costs. If the anterior contractual obligation is recorded in the same document as a costs agreement, some provisions of that document will be rendered void by s 178(1)(a) but not others.

Ultimately, Mr Bolton’s contention that the entire Bolton Agreement is void depends upon it being treated as a single, indivisible contract because all the provisions are located in a single physical document. There is some artificiality in that position, highlighted by Mr Bolton’s acceptance that the position might be different if his promises to pay the Firm’s legal costs had been contained in a separate or collateral contract.

There may be cases where it is not clear whether a particular provision is part of the costs agreement which is rendered void by s 178(1)(a). In this respect, the proper construction of the word “void” does not mean that the costs agreement ceases to exist, but only that the legal effect or consequence of the costs agreement is denied for a purpose consistent with Part 4.3 of the LPUL: Bingham v Bevan at 295; [40]-[41]. For the reasons set out above, the purposes of Part 4.3 relate to quantification of legal costs, including the fair and reasonable amount payable, disclosure to the client and how the legal costs are to be quantified if the parties cannot agree. In any given case, those purposes will determine the extent to which the legal effect of the provisions in a particular costs agreement is denied under s 178(1)(a): Bingham v Bevan at 297, [45].

In any event, it is not part of the purposes of Part 4.3 to render void the anterior obligation of the client (or the ATPP) to pay the firm’s legal costs. In the case of the Bolton Agreement, it may be accepted that some of the provisions constitute a Part 4.3 costs agreement as stated in the annexures (eg see [16] above). It does not follow that every provision in the document is part of the costs agreement. Paragraphs 7 and 8 are not part of the costs agreement. They are not rendered void by s 178(1)(a). The Firm may enforce paragraphs 7 and 8 in accordance with their terms.

For these reasons:

The appeal from the determination of, and the substitute certificates issued by, the review panel is to be dismissed.

Appeal Ground 2 in the Amended Summons is as follows:

The parties’ written submissions on the appeal do not specifically address Ground 2, although it was touched upon in oral argument. Although Ground 2 is described in terms of s 178(1)(b), the submissions at the hearing focussed on the ATPP having an alternative liability for the legal costs on a quantum meruit.

In view of my conclusion above, it is not necessary to decide Ground 2. Had it been necessary, I would have found that absent a contractual entitlement, the Firm was entitled to payment by Mr Bolton for work performed after 5 April 2018 and to that extent uphold Ground 2.

Section 171(2) of the LPUL provides that an ATPP’s legal obligation to pay the law practice can arise “by or under contract or legislation or otherwise”. Before the review panel, the Firm alternatively contended that Mr Bolton has a liability which has arisen “otherwise”. It submitted that even if the Bolton Agreement is denied all legal effect by virtue of s 178(1)(a), Mr Bolton is still liable for the costs claimed by the Firm on a quantum meruit. The review panel rejected that contention. Before the Court, Mr Bolton sought to uphold the review panel’s decision and submitted that he has no liability on a quantum meruit because the benefit of the legal services was received by ASH, not Mr Bolton. Absent receipt of the benefit, it was submitted that Mr Bolton was not “enriched”.

Both parties addressed this aspect of the case in terms of a quantum meruit. I take this to mean a simple money claim for work done at the request of the defendant. This is a long-established and well recognised category of case: Lumbers v W Cook Builders Pty Ltd (2008) 232 CLR 635; [2008] HCA 27at 665, [86]. Even if there is no enforceable contract, a client for whom a solicitor provides legal services is likely to be liable to pay for the services pursuant to such a claim: Wentworth v Rogers [2006] NSWCA 145 at [55]-[56] (Santow JA). The position is not so clear for a non-client like an ATPP.

Although Ground 2 is not directly concerned with the liability of the client, the position of ASH is relevant. Contrary to my conclusion above, I am now considering the hypothesis that s 178(1)(a) operates so that Mr Bolton’s anterior contractual obligation to pay legal costs is not enforceable by the Firm. The hypothesis extends to deny ASH’s anterior contractual obligation under its retainer and the separate agreement it entered into with the Firm on 23 April 2018. The Firm failed to comply with its separate costs disclosure obligations to ASH and hence ASH’s liability for the Firm’ costs is also void under s 178(1)(a). The result is that there is no enforceable contract which provides for the payment of the legal costs which are the subject of these proceedings. A money claim by the Firm against Mr Bolton does not therefore have to overcome any obstacle which an enforceable contract with ASH might otherwise present (cf Lumbers v W Cook Builders at 655, [47] (Gleeson CJ) and 663, [79] and 671, [111] (Gummow, Hayne, Crennan & Kiefel JJ); Nikolic v Oladaily Pty Ltd [2007] NSWCA 252 at [101] (Mason P, with whom Campbell JA and Handley AJA agreed).

Turning to the detail of the money claim, in the short form pleading in UCPR 14.12(1)(c) the claim is formulated as work done by the plaintiff “for the defendant at the defendant’s request”. The meaning of that formulation was considered in Johnson v Leader Computers Pty Ltd (2014) 118 SASR 408; [2014] SASCFC 14 at 422, [78]-[81], where Blue J said, with the agreement of Sulan & Anderson JJ:

As the Court pointed out in Johnson v Leader Computers at 420-421,[74]-[76], the requirement that there be a request for the work, and the absence of a separate or additional requirement that the defendant personally benefit from the work, is apparent from the High Court’s decision in Lumbers v W Cook Builders. In that case, Lumbers entered into an unenforceable contract with a building company (Sons) to carry out building work on land owned by Lumbers. Unbeknown to Lumbers, Sons requested another building company (Builders) to perform the work. There was no contract between Sons and Builders. After the work was completed, Builders was dissatisfied with the payment it had received from Sons, so it brought an action for work done for and at the request of the defendant. Originally both Sons and Lumbers were defendants, but the claim against Sons was stayed when Builders failed to comply with an order to provide security for Sons’ costs. The case thereafter continued against Lumbers alone. The plurality (Gummow, Hayne, Crennan & Kiefel JJ) held that if Builders had done the work at the request of Lumbers the claim would have fallen neatly within long-established principles, and that it would have been neither necessary nor appropriate to consider whether Lumbers had benefited from the work. However, the evidence established that Sons had requested the work, not Lumbers, so the claim against Lumbers failed (at 665-667;[86], [89]-[90]). On the other hand, Builders would have had a claim against Sons even though Sons did not own the land upon which the work was done (at 671, [111]).

A case which did succeed even though the defendant did not receive a direct benefit is Paynter v Williams (1833) 149 ER 626 at 629-630; 1 Cr & M 809 at 818-820 (Lord Lyndhurst CB, Bayley, Vaughan & Bolland BB). The Court upheld an assumpsit on a bill which the plaintiff apothecary had sent to the parish of Gumfestron for the apothecary’s fees for attending a pauper. The apothecary’s services were provided for the personal benefit of the pauper and not for the benefit of the parish of Gumfestron. The pauper did not even reside in Gumfestron, although his settlement was there which appears to have given the parish of Gumfestron an obligation to relieve the pauper. The Court inferred from the conduct of the overseer of Gumfestron that there had been a request to the apothecary that he continue to attend the pauper. In those circumstances, the law imposed a legal liability on Gumfestron to pay the apothecary’s fees for attendance made after the request was made.

What these cases show is that it is necessary to pay close attention to the facts of a case in order to ascertain whether the work may be characterised as having been done “for and at the request of” the defendant (Lumbers v W Cook Builders at 674, [127]). In some cases, there will not be a simple answer to that question.

A summary of the facts in this case is set out at the beginning of the Judgment.

The opening text of the Bolton Agreement is set out at [12] above. It stated that Mr Bolton had “asked” the Firm “to provide legal advice and assistance” to ASH. Mr Bolton countersigned the Bolton Agreement from which it may be inferred that the statement is true. Paragraph 1 of the Bolton Agreement included the statement that Mr Bolton was, as at April 2018, disqualified from managing corporations and that the Firm would not accept instructions from him but would take instructions from an authorised representative of ASH. The fact that the Firm would receive day to day instructions from someone other than Mr Bolton does not mean that it was not Mr Bolton who requested the Firm to provide legal services to ASH.

As discussed in Johnson v Leader Computers, Mr Bolton’s association with ASH and the Australian Style Unit Trust of which ASH was trustee suggests that he had an indirect interest in the Firm’s legal services being provided to ASH for its claim arising from the investment it had made on behalf of the Trust. This provides further support for a finding that the Firm provided the legal services for and at the request of Mr Bolton.

In all the circumstances, the legal services provided by the Firm after 5 April 2018 should be so characterised. Once it is accepted that the Firm’s legal services were provided in response to Mr Bolton’s request, and that the provision of the services was obviously not intended to be gratuitous, a liability is imposed on Mr Bolton to pay for the services.

This alternative claim was before the review panel. In view of the review panel’s decision that Mr Bolton has a contractual liability for the legal costs under the Bolton Agreement, it was not necessary for the review panel to decide the issue. Before the Court, the only submission made by Mr Bolton again such a liability is that he did not receive a benefit from the Firm providing the legal services to ASH. Whilst it may be accepted that the legal services were provided to ASH, in the sense that ASH was the client of the Firm and the party to the litigation in which the Firm was acting, it does not follow that Mr Bolton did not receive a benefit from the services being provided. On the contrary. in the words of Blue J in Johnson v Leader Computers, it might be considered to be implicit in Mr Bolton’s request for the legal services that the parties proceeded on the basis that Mr Bolton would receive a benefit from the work simply because he wished the work to be done.

For these reasons, even if the Bolton Agreement is denied all legal effect by virtue of being void under s 178(1)(a), Mr Bolton has an obligation to pay the Firm’s legal costs. That obligation, however, only covers the legal costs for the work done by the Firm after 5 April 2018. Without the opening words of the Bolton Agreement, the evidence does not permit a finding that Mr Bolton made an earlier request for legal services to be provided to ASH. The Firm’s work before 5 April 2018 was not done for and at the request of Mr Bolton.

The (now) undisputed figure for the fair and reasonable costs claimed by the Firm is $308,949.19. This figure represents the costs for legal services which were provided both before and after 5 April 2018. In the period after 5 April 2018 the Firm billed $87,533.20. It is unclear from the evidence whether that lower figure is the proper amount for the claim now being considered. Some of the payments which the firm received after 5 April 2018 may have been applied to reduce the more recently billed costs. In any event, it is unnecessary to identify the precise figure because the Firm is entitled to be paid the full amount assessed by the review panel under the Bolton Agreement.

For these reasons, I make the following orders: