DISTRICT COURT OF QUEENSLAND

CITATION:	HWL Ebsworth Lawyers v Pickering Auto Group Limited & Anor [2018] QDC 222	
PARTIES:	HWL EBSWORTH LAWYERS
(plaintiff/respondent)
v
PICKERING AUTO GROUP LIMITED
(first defendant/applicant)
and
BRENDAN GEOFF PICKERING
(second defendant/applicant)	
FILE NO/S:	4755/17	
DIVISION:	Civil	
PROCEEDING:	Application	
ORIGINATING COURT:	District Court at Brisbane	
DELIVERED ON:	18 April 2018 (ex tempore)	
DELIVERED AT:	Brisbane	
HEARING DATE:	18 April 2018	
JUDGE:	Farr SC DCJ	
ORDER:	1.	Application dismissed;
2.	Further orders as agreed upon by the parties.	
CATCHWORDS:	COSTS – assessment – application for stay of proceedings until completion of costs assessment and directions hearing – where the applicants/defendants allege that the respondent/plaintiff did not provide adequate disclosure of costs – where a notice of intention to defend and defence have not yet been filed – whether the issue of disclosure should be determined prior to the assessment of costs
Legal Profession Act 2007 (Qld) s 315, s 326, s 335, s 338, s 341
Uniform Civil Procedure Rules 1999 (Qld) r 743B, r 743G	
COUNSEL:	S Lee for the plaintiff/respondent
D de Jersey for the defendants/applicants	
SOLICITORS:	HWL Ebsworth Lawyers for the plaintiff/respondent
Roberts Nehmer McKee for the defendants/applicants	
[1]	The plaintiff sues the defendants for the sum of in excess of $264,000, as money claimed to be due and owing for legal services rendered by the plaintiff for the first defendant.  The defendants apply, pursuant to section 335 of the Legal Profession Act and rule 743B of the UCPR, for an assessment of the claimed legal costs, for a stay of the proceedings until that assessment has been completed and for directions pursuant to rule 743G. 
[2]	The plaintiff commenced this proceeding by a claim filed on the 8th of December last year.  In that claim it alleges damages of precisely $264,947.99, alleged to be owing pursuant to a written retainer agreement, dated the 1st of March 2017.  
[3]	In oral submissions before me counsel for the plaintiff has acknowledged that the statement of claim contains inaccuracy and needs to be amended, but that issue is of little relevance to today’s application and I tend to agree.  
[4]	The second defendant’s material exhibits documents comprising the written retainer agreement, dated the 1st of March 2017, and a second subsequent written retainer which was dated the 26th of April 2017, which contains an amended scope of work which was a reduced scope of work and a reduced costs estimate.  
[5]	The material difference between the two agreements is that the former retainer estimated legal costs for the services in the amount of $460,000 to $485,000, excluding GST and disbursements, whereas the subsequent agreement estimated legal costs in the amount of $318,000, excluding GST and disbursements.  
[6]	The second defendant states that the second retainer was entered as a consequence of an agreed reduction in the scope of the work to be undertaken by the plaintiff.  The material identifies that the first defendant had already paid the sum of $263,274.64 in legal costs, pursuant to the retainer, with the outstanding amount being the amount the subject of this claim.  
[7]	The defendants’ material identifies the basis for the defendants’ objection to the costs as follows – which appears in the affidavit material, quote:
“The defendants contend that the costs over and above those estimated in the revised costs agreement of $356,800 and taking account the early termination of the retainer as referred to in paragraph 4 herein, are not claimable against nor payable by the defendants as the plaintiff failed to provide any disclosure or advice of any nature whatsoever.  That the costs to be rendered would or would be likely exceed the estimate provided in the revised costs agreement, as required by section 315 of the Legal Profession Act.” 
[8]	Section 315 of the Act states:
“A law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under this division as soon as is reasonably practicable after the law practice becomes aware of that change.” 
[9]	Section 335, subsection (1) of the LPA provides:  
“A client may apply for an assessment of the whole or any part of legal costs.”
[10]	Section 338(b) provides that:  
“If a costs application is made – subject to the leave of the court, the law practice must not start any proceedings to recover the costs until the costs assessment has been completed.” 
[11]	I’ve also been referred to rule 743B of the UCPR, which I won’t repeat in the course of these remarks.  Rule 743G of the UCPR has also been referred to me.  And relevantly, it states, in subsection (1):  
“The relevant court may hold a directions hearing in relation to an application for a costs assessment.”  
[12]	And at (2):  
“At the directions hearing, the relevant court may consider the following matters –“ 
[13]	Subsection (d) then goes on to read:  
“Whether it is appropriate for any question to be tried before the costs are assessed, including, for example – 
(i) whether a person claimed to be liable to pay costs is liable to pay those costs;  and 
(ii) whether any costs agreement relied on by the lawyer concerned is void;  and 
(iii) whether the lawyer concerned was negligent;  and 
(iv) whether the lawyer concerned was in breach of the contract of retainer;  and 
(v) whether the lawyer concerned acted without the instructions of, or contrary to the instructions of, the client;”  
[14]	The plaintiff does not necessarily disagree that an assessment might be necessary, but it is the plaintiff’s position that there should be a defence filed before there is an assessment and determination by the court as to whether there has been breach of the relevant legislative provisions as to disclosure.  
[15]	It is opposed – that course is opposed by the defendants, which are the applicants, of course, in this application, on the basis that it would cause unnecessary further cost and delay in the circumstances where the defendants’ objection to the claim to costs have already been clearly stated.  
[16]	The defendant applicants submit that in this case there is no agreed retainer, other than the 1st of March ’17 and the amended retainer, dated the 26th of April ’17, which have been identified, and it is submitted that there would appear to be no substantive questions of fact which would require a hearing before this court before the assessment proceeds.  
[17]	It is submitted on behalf of the applicant that the plaintiff has failed to show any substantive dispute that requires determination prior to the assessment.  Section 341, subsection (2)(e) of the Legal Profession Act provides that the assessor may have regard to:  
“The retainer and whether the work done was within the scope of the retainer;”  
[18]	The applicant submits that the phrase, “the assessor may have regard to” when referring to the retainer and whether the work done was within the scope of the retainer and complied with the Legal Profession Act and any disclosures made by the law practice, are questions that could be determined by the assessor at the time of assessment.  
[19]	Whilst that might be “convenient”, I do not read into the phrase, “have regard to” the additional meaning to decide factually.  No authorities to support that submission have been provided.  Furthermore, such a preliminary determination would appear to fall squarely within the ambit of rule 743G(2)(d) of the UCPR, which specifically requires resolution of issues by a court.  Such issues, as identified, would include that which is in issue here.  
[20]	The plaintiff, which is the respondent in this application, has submitted that by letter of the 28th of February 2017 a costs agreement signed on the 1st of March 2017 complied with the requirements of the Legal Profession Act.  It is submitted that the letter and the agreement stated that professional fees would be charged on the basis of hourly rates, including GST, which were set out.  It contained a breakdown of estimated costs for each particular aspect of the work – or what’s called the work stream – and the letter and costs agreement also stated that in addition to the professional fees the client had to pay disbursements at cost, plus GST.  
[21]	The letter and costs agreement were each headed Initial Public Offering and listing on the ASX and gave an estimate of professional fees for the IPO/ASX work and the acquisition work, as in the order of $460,000 to $485,000, excluding GST and disbursements, as I’ve indicated, or to put it another way, $506,000 to $533,500, including GST, but still excluding disbursements.  
[22]	As indicated, after the plaintiff had performed what the plaintiff submits was substantial work, including IPO/ASX work, the client decided to engage another firm, Allens Linklaters, to do the IPO/ASX work, leaving the plaintiff to do the acquisition and due diligence work moving forward.  
[23]	It was due to this change, it is submitted, that the plaintiff then issued a further costs disclosure letter and cost agreement on or about the 26th of April 2017.  That was – that document, or those documents were headed Acquisition and Due Diligence and the breakdown of work streams admitted work that had previously been previously included, work relating to the IPO/ASX listing.  Otherwise the documents were similar to the previous documents in that regard.  And they gave an estimate of professional costs, as I’ve said, for the acquisition work, in the order of $318,000, excluding GST and disbursements.  
[24]	Subsequently, on the 6th of June 2017, having realised that previously made assumptions were not correct, the plaintiff issued a variation table reflecting an increase in the estimate.  It has been submitted that given the current timeframe for this application it has not been possible to precisely work out the precise value of that increase, but it refers to an increase of at least $100,000.  Subsequent to that, the client decided to discontinue with the proposed commercial transaction and the plaintiff’s services were terminated on the 25th of July last year.  
[25]	The plaintiff submits that by that stage it had performed substantial acquisition work and it notes in the material that it had done, “much more work than we could have anticipated”, which is attributable to the structure adopted to carry out the transaction, and added that, “instructions on the requirements of the work to be carried out changed on a number of occasions, and, in particular, once Allens Linklaters were engaged”.  
[26]	The plaintiff has provided a summary of the invoices that were sent in relation to this matter, in the amounts and dates and those that were paid.  It is the final invoice that remains unpaid in the amount that is the subject of this claim.  
[27]	The plaintiff has submitted that invoiced work totalling $484,063.30, excluding GST, included IPO/ASX work which was done before the plaintiff was told to cease that work.  Being work relating to the IPO/ASX listing done before the second costs agreement was made, it is submitted that it must be taken therefore to be work done under the first costs agreement and payable as such.  It is submitted that it is not work covered by the estimate given in the 26th of April 2017 document, and there would appear to be some merit in that submission.  
[28]	An officer of the plaintiff has attempted to quantify the precise figure for that work, although in the timeframe cannot be precise, but estimates it between $60,000 and $70,000.  The plaintiff has also submitted and relied upon evidence to show that the invoices include disbursements in the total amount and that the disbursements themselves total $17,016.88, excluding GST.  
[29]	Given those figures, when one deducts the value of disbursements and the value of the IPO/ASX work done prior to the second costs agreement, it has been submitted that the total professional costs which have been billed, relevant to this matter, are around $400,000.  The plaintiff submits that the comparison which should be made therefore on this interlocutory footing is that between the 26th of April 2017 estimate of $318,000, plus the $100,000 of increase contained in the variation table, dated the 19th of May, with the $400,000 in professional costs charged.  
[30]	On that basis it is submitted that it is arguable that the professional costs billed by the plaintiff did not exceed or substantially succeed the estimate.  Of course, inherent in everything I’ve said so far, it is the case that no notice of intention to defend and defence has yet been filed.  
[31]	The plaintiff has submitted that where there is a compliant costs agreement there is no automatic right to assessment.  It is noted that the applicant does not contend that the costs agreement itself is non-compliant or should be set aside, only that there was not ongoing costs disclosure.  That is an issue that the plaintiff contests.  
[32]	Section 326 of the Legal Profession Act states that:  
“...a costs agreement may be enforced in the same way as any other contract.”  
[33]	There is an exception to that rule and that is that if a law practice does not disclose to a client anything required by division 3 of part 3.4 of the Legal Profession Act to be disclosed, then the client need not pay the legal costs unless they have been assessed under division 7.  And the law practice may not maintain proceedings against the client for the recovery of legal costs unless they have been assessed under division 7.  
[34]	As I have said, there is an issue in dispute here as to whether the plaintiff failed to make ongoing disclosure in breach of section 315, which is contained in division 3.  In fact, that is the principal issue in contest relating to this application.  As it is an issue, it needs to be determined.  It is an issue anterior to the assessment because if the issue is determined in favour of the plaintiff, there may well be no right of assessment at all.  
[35]	The plaintiff further submits that if an assessment were carried out now it might prove to be a waste of time and costs because the assessor may proceed on the footing that section 315 had not been complied with and a court might later determine otherwise.  
[36]	As I have said, it is, in my view, a matter that requires resolution by a court.  This is a case where pleadings should be delivered and appropriate directions given.  For those reasons the application is dismissed.  And insofar as orders, gentlemen, I take it that you two should chat to each other about the orders that might be appropriate in the circumstances.