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ACT solicitor/client costs: A client’s complaint to the Law Society can operate to stay a costs assessment proceeding!

 Nicholl & Co Pty Ltd v Turner &Anor [2015] ACTSC 42 (3 March 2015)

Whilst this matter was resolved in March 2015, the related law remains unchanged in 2016, with important consequences for any practitioner practicing in the Australian Capital Territory.
Facts
After a plaintiff legal practitioner filed an application for assessment of solicitor/client costs, a client made three complaints to the Law Society, including complaints relating to the costs charged by the practitioner.
The Complaints Committee of the Law Society refused to consider the complaint or commence an investigation because proceedings were on foot in the Supreme Court, namely, the proceedings seeking assessment of costs.
The position of the Law Society was that, because the client’s first complaint to the Law Society was written on 18 August 2014, 11 days after the application for costs assessment was lodged by the legal practitioner, the complaint did not fall within the proscription in section 304(1) of the Legal Profession Act 2006 (ACT) (“the Act”).
The issue before the Supreme Court was whether s 304 of the Act means that the assessment of the costs could not proceed.
Relevant provisions
 
LEGAL PROFESSION ACT 2006 – SECT 304
Legal costs subject to consumer dispute not assessable
    (1)     Despite anything to the contrary in this part, legal costs that are or have been the subject of a consumer dispute under chapter 4 (Complaints and discipline) must not be the subject of a costs assessment under this division. 
    (2)     This section is subject to section 409 (Referral of matters for costs assessment—complaint investigation). 
 
LEGAL PROFESSION ACT 2006 – SECT 409
Referral of matters for costs assessment—complaint investigation
    (1)     For investigating a complaint, the relevant council for an Australian legal practitioner may refer a matter to the Supreme Court for an assessment of costs charged or claimed by the practitioner. 
    (2)     The referral may be made outside the 12-month period mentioned in section 294A (5) (Application by client or third party payer for costs assessment). 
    (3)     In deciding whether to refer a matter for a costs assessment, the relevant council must consider whether the client was aware of the client’s right to apply for an assessment within the 60-day period and, if the client was aware, whether the referral may cause significant injustice to the legal practitioner. 
    (4)     Subject to this section, division 3.2.7 (Costs assessment) applies to the costs assessment as if the relevant council were a client of the practitioner.
Decision
Master Mossopdetermined that the reference to “are or have been” in s304 of the Act is that “if the legal costs have ever been subject to a complaint or at any time prior to the conclusion of the assessment are subject to a complaint, then the assessment must not proceed” (emphasis added).
Therefore, if a complaint is made after an application for costs assessment was filed (but before the conclusion of that assessment), then that costs assessment must not proceed.
To justify the above interpretation of s304 of the Act, Master Mossop reasoned as follows:
“18. A temporal qualification upon the complaints which would prevent assessment might have been incorporated into the section if it had provided “must not be the subject of an application for costs assessment under this division”. That would have precluded an application for costs assessment being made where there was or had been a complaint but would not prevent an assessment continuing if a complaint was made after the application for assessment. However, the section does not so provide. Instead it simply says, “must not be the subject of a costs assessment”. A “costs assessment” incorporates the whole process of an assessment from the filing of an originating application for costs assessment under r 3621 to the conclusion of the process in accordance with the directions of the registrar under r 3623 and ss 299-300B of the LPA. The terms of s 304 are sufficient to prohibit that process at any point. As a consequence, I do not accept the position articulated in the correspondence by the Law Society and I accept the submissions of the plaintiff that the subsequent filing of a complaint to the Law Society has the effect of preventing the assessment process from proceeding.”
Master Mossop further states that “the effect of s 409 is to empower, but not compel, the Law Society to initiate a costs assessment process when dealing with a complaint”.
Importantly, as section 304 does not operate for a limited period and continues to operate even after the “consumer dispute under chapter 4” is finalised, costs assessment cannot proceed unless the Law Society refers the compliant for costs assessment by exercising its powers under s409.
 
Implication
This decisionis likely to be problematic for any legal practitioner.
In light of the Supreme Court of the ACT’s interpretation of s304 of the Act, if a client makes a complaint to the Law Society and withdraws that complaint before the Law Society decides to refer the matter to costs assessment (under s409 of the Act), it is possible that the legal practitioner may never be able to recover his or her fees.
That is unless if the practitioner commences proceedings to recover costs relying on the costs agreement in the same way as any other contract: s 286 (1) of the Act. However, this is possible only if a valid costs agreement exists.
Further, if that law practice does not disclose to a client anything required by division 3.2.3 of the Act to be disclosed, the client does not need to pay the legal costs unless they have been assessed under division 3.2.7 of the Act: s 277 (1) of the Act.
Consequently, if a client makes a complaint to the Law Society and withdraws that complaint before the Law Society decides to refer the matter to costs assessment, and the legal practice has made a minor failure to disclose, that law practice may never recover its legal feesas their legal costs are no longer able to be assessed under division 3.2.7 of the Act.
Lawyers must remember
If for some reason you are unable to have your costs assessed by a Costs Assessor, you may be able to commence proceedings relying on your costs agreement in the same way as any other contract.
Disclosure is extremely important and a minor slip in disclosure may lead to your legal costs not being recoverable.
Contact  Blackstone Legal Costing for all your legal costing needs – including advice regarding whether you are complying with the disclosure requirements.