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Episode 37 Buy Episode

Costs assessments: fair, reasonable… and proportionate?

Law as stated: 14 April 2021 What is this? This episode was published and is accurate as at this date.
In this episode we discuss costs assessments with Mike Dudman, Director of Blackstone Legal Costing, who shares his insights and experiences both in and out of court.
Practice Management and Business Skills Practice Management and Business Skills
Substantive Law Substantive Law
14 April 2021
Mike Dudman
1 hour = 1 CPD point
How does it work?
What area(s) of law does this episode consider?The costs assessment process, particularly in New South Wales, Victoria and Queensland.
Why is this topic relevant?Understanding the costs assessment process is important for all lawyers, but particularly for litigation and dispute resolution lawyers in the event costs are assessed under a court order, or the client raises an issue regarding costs.

Ordinarily, in a costs assessment the lawyer will have to provide itemised bills and detailed timesheets that detail the time and costs incurred. The costs assessment process can be difficult to navigate due to determining: the applicable legislation, whether the assessment is made within time, the fees associated with the costs assessment, who’s liable to pay those fees, rights of appeal, and the correct way to communicate with both the assessor and the other side in the costs assessment.

What legislation is considered in this episode?Legal Profession Uniform Law 2015 (NSW), specifically,

  • Section 172 – sets out the current test in NSW of costs being incurred on the ‘fair and reasonable’ basis and lists what considerations the court must have regard to.
  • Section 174 – costs disclosure obligations of a law practice to their clients.
  • Section 198 – an application for a costs assessment must be made within 12 months of receiving the bill.
  • Section 298 – charging more than a fair and reasonable amount for legal costs can amount to unsatisfactory professional conduct or professional misconduct.
What cases are considered in this episode?Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2014] FCA 346

This case involved a costs dispute arising from a cost order made in the Applicant’s favour in a 2013 judgment. In 2014 the Applicant sought an order that its costs be paid on a lump sum basis by the second and fourth Respondents.

Mike Dudman gave evidence as an expert in the assessment of legal costs. He was instructed to ‘provide his opinion as to the amount likely to be considered by a taxing officer as the necessary and proper costs and disbursements incurred by the applicant (for the period up to 31 July 2011) and as the reasonable costs and disbursements incurred thereafter if the applicant’s costs and disbursements were to be taxed in accordance with the relevant rules of Court on the party/party basis.’ [8]  He concluded that the amount of costs and disbursements likely to be awarded to the applicant was $729,223.98.

Mike Dudman’s cost analysis led him to conclude that costs would likely be reduced by no more than 10%. With regard to taxation on the disbursements incurred in the proceedings, they would be likely be reduced by not more than 5% given that, in his professional opinion, they were incurred on a ‘necessary or proper’ or ‘reasonable’ basis.

Armstrong Strategic Management and Marketing Pty Limited v Expense Reduction Analysts Group Pty Ltd (No 10) [2017] NSWSC 16

Similarly, this case involved a costs dispute arising from a principal judgment made in July 2016 in favour of the Defendants, whereupon the proceedings were dismissed, partial cost orders were made in the Defendant’s favour.

In September 2016 the Defendants, by notice of motion, sought an order under s 98(4)(c) of the Civil Procedure Act 2005 (NSW) that the Plaintiff pay the Defendants’ cost of the proceedings, assessed on a gross sum basis, and fixed in the amount of $6,481,994.94 as arrived at by costs consultant, Mike Dudman.

Ball J found in favour of the Defendants and relied exclusively on Dudman’s expert evidence in arriving at a costs order of $5.75 million. Ball J noted that the figure of $6,481,994.94 was derived from a conservative approach to the costs assessment by Dudman, which was made based on invoices totalling $9,140,147.35.

Shi v Mills Oakley [2020] VSC 498

In this case, Mr Shi retained Mills Oakley to represent him in a shareholder dispute. In November 2016, a solicitor from Mills Oakley told Mr Shi said that it was difficult to estimate the costs of the litigation, but that it could potentially be around $100,000. The following day Mills Oakley sent a costs agreement to Mr Shi that listed the total fee estimate as ‘$50,000 (+ disbursements + GST).’  Following an unsuccessful mediation between Mr Shi and the other party, Mills Oakley informed Mr Shi that the costs would be approximately $60,000, which included counsel’s fees and fees associated with trial preparation.

However, in October 2019 when the trial concluded, Mr Shi was told that the cost of the proceedings totalled $267,888, which comprised $74,000 in disbursements and $169,500 in legal fees. Mr Shi argued that his lawyers did not provide a valid costs agreement, nor a valid estimate of his legal costs, and failed to disclose the basis on which costs were to be charged. Mills Oakley claimed that Mr Shi failed to properly analyse the costs agreement, but the court disagreed, ruling that Mills Oakley failed to comply with their requirements under the Legal Profession Uniform Law. The Supreme Court determined that Mills Oakley failed to disclose hourly rate increases for partners and senior associates over the course of the case and failed to provide a reasonable estimate of disbursements and total legal costs.

What are the main points?
  • Costs assessments are an expensive and lengthy process that should be avoided, with an emphasis on the parties reaching a consensual agreement.
  • The costs assessment process varies in each state. NSW and VIC apply the ‘fair and reasonable test’ while QLD uses the ‘necessary or proper’ test.
  • Having multiple practitioners, or engaging multiple counsel on a matter, is a common objection to costs.
  • Issues with apportionment in matters with multiple parties and issues also raises concerns as to the true liability of costs.
  • As a lawyer, maintaining detailed time entries and keeping good records is key to ensuring that you’re not exposed to objections from other parties in the event of a dispute.
  • The proportionality approach used in the UK is a hot topic for costs assessors in Australia, but data shows it is not currently being applied regularly as a reason for disallowing costs in Australian decisions, notwithstanding the inclusion of proportionality in the LPUL.
  • In NSW, the appropriate range for recoverable hourly costs is $450-$750 for senior solicitors with 10 years+ experience.
  • The party who pays the cost of the assessment is often dependent on which party has made the more genuine attempt to negotiate costs to avoid a formal assessment.
What are the practical takeaways?
  • In NSW:
    • The test applied in NSW is whether costs are ‘fair and reasonable’ – however, s 172(1) of the LPUL states that this test includes an assessment of whether costs are proportionate.
    • The first step in a costs assessment is to make an application to the Supreme Court of NSW to have costs formally assessed by a costs assessor.
    • The other party will have 21 days to file an objection, after which a costs assessor will be appointed and take submissions.
    • Once the cost assessor has made a decision, he or she will issue a certificate of determination which can be enforced by the parties.
    • A party can make an application for review within 30 days of receiving the determination which will be conducted by a review panel of two costs assessors.
    • Appeals against a decision of the review panel can be made to either the District Court (the party must seek the leave of the court if the amount is less than $25,000) or the Supreme Court (the party must seek the leave of the court if the amount is less than $100,000).
  • In QLD:
    • The test in QLD is that costs are incurred ‘necessarily and properly.’
    • Applications for a costs assessment are heard in different courts depending on the quantum of the disputed amount.
    • If the amount is more than $750,000 it will be heard in the Supreme Court, if it is between $150,000 – $750,000 it will be heard in the District Court and if it is under $150,000 it will be heard in the Magistrates Court.
    • The costs assessor will issue a certificate of costs within 14 days.
    • In a standard matter, a party can appeal within 21 days after receiving the certificate to request written decisions. This time limit is 14 days in solicitor/client matters.
    • The costs assessor then has 21 days to provide reasons.
    • If a party still wants to appeal, they can do so within 14 days of either receiving the certificate of costs or written reasons for the decision.
  • In VIC:
    • The test in VIC is the ‘fair and reasonable’ test similar to NSW.
    • Costs matters are heard in the costs court, a division of the Supreme Court of Victoria.
    • After the costs court has made a decision, a party has 14 days to seek a review.
    • A review can be conducted by the registrar who performed the initial assessment before being reviewed by a costs judge.
    • A Supreme Court judge can then review a costs judge’s review if necessary.
  • It’s recommended that solicitors inform clients if certain tasks will be non-recoverable in the event of a costs dispute.
  • If the costs for a matter is being contributed to by the client’s own frequent communications, it is a good idea to explain that to the client in writing as early as possible.
Show notes 

Supreme Court of NSW’s guideline on costs payable between parties under court orders

Supreme Court of NSW’s information sheet on communication between parties and with costs assessors

Law Society of NSW ‘Costs Guide’ 7th edition (2017) Chapter 4: Uniform Law and Costs Assessment

David Turner:

 

 

 

 

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Hello and welcome to Hearsay, a podcast about Australian laws and lawyers for the Australian legal profession, my name is David Turner. As always, this podcast is proudly supported by Assured Legal Solutions, a boutique commercial law firm making complex simple.

Most lawyers will be familiar with the concept of costs assessment – a process where legal costs are assessed by an independent person known as a costs assessor. Now, lawyers who specialise in litigation and dispute resolution might be more familiar with or more likely to be directly involved in a costs assessment based on costs orders made in a court or tribunal. But there are other instances where a costs assessment might be sought including by a client of a law firm, by a third-party payer, or by a law firm who’s even engaged another law firm to act on behalf of a client. And because of these scenarios, all lawyers are likely to be involved in a costs assessment at some point in their legal career. Now costs assessment raises many questions not just in regards to the process and the quantum of costs in question, but also to which legislation applies, whether the assessment is made within time, the fees associated with the costs assessment and who’s liable to pay them, as well as the correct way to communicate with both the assessor and the other side in the costs assessment and whether there are any rights of appeal. Helping us to understand and navigate the costs assessment process today is Mike Dudman who leads the Sydney, Brisbane and Gold Coast practises of Blackstone Legal Costing. Now Mike has worked on several thousand matters involved in costs assessment and has appeared in court as a recognised expert in costs law. Mike thanks so much for joining us today on Hearsay.

Mike Dudman:Thanks for having me David, good to be here.
DT:

2:00

Now Mike you hold a Bachelor of Arts, a Bachelor of Laws and an MBA, which I might be a little biased, but great qualification for a lawyer to have I think. Tell us about how you became a costs lawyer?
MD:

 

 

 

 

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I’ve always enjoyed a generalist approach to not only my life but my studies and my professional life as well. One of the reasons I did my MBA subsequent to my law degree and my arts degree, which majored in psychology, was to round it out with finance. I’ve always enjoyed every sort of part of really what I do in my world. And one of the things that cost law attracted me to, was the fact that really we get an opportunity to see every part of the legal framework really with respect to litigation. So we’re involved with matters ranging from medical negligence to personal injury matters involving in motor vehicle accidents, your typical slip and fall, all the way through to commercial litigation, very high level commercial disputes, contractual disputes, really the whole gamut of litigation with just a few exceptions such as family law and criminal law where we really don’t get involved because of the nature, the sort of the no-cost jurisdictions there. But it certainly was attractive to me as an opportunity to have a broad career in law, but also an opportunity to specialise and as we all know these days sort of if you can sort of specialise your skills you can go fairly quickly in the direction you want to go in a career perspective. And as a young lawyer that’s certainly what attracted me to costs law.
DT:

 

 

 

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It certainly does cover just about every area of disputes related legal practise and as we said a bit earlier, plenty of non-dispute related areas of legal practise as well. Let’s start with that disputes cost sphere, if you like. Now some of our listeners who are litigation lawyers will be familiar with parts of that process, but I imagine many won’t because of course costs can be agreed, costs can be dealt with by other firms, specialist cost lawyers of course.

TIP: Before we hear further from Mike about his extensive experience in costs assessments, let’s just go over what a costs assessment actually is. The term ‘costs’ usually refers to the professional fees and disbursements that a solicitor charges their client for their legal services, although a barrister’s fee can also be assessed.

Professional costs are charged for the lawyer’s time, effort and expertise and can be charged a number of different ways, including by:

  • by fixed fee;
  • by an hourly rate or what’s commonly called a “do and charge basis”; or
  • by a ‘no win, no fee,’ or speculative basis.

Now, if you’re a lawyer in private practice then you probably already know that traditionally each hour is charged in 6-minute increments, every hour being divided into 10 6-minute blocks. For example, if the lawyer charges $500.00 per hour of their time and they spend 4 minutes on a phone call, the client will be charged one 6-minute unit, in this case $50. If that call were to take 8 minutes, then the client will be charged 2 units, 12 minutes, costing $100.

However, in the past few decades we’ve seen a shift toward providing fixed fees for legal services, often for tasks such as conveyancing and the preparation of wills but also in commercial and corporate matters. There’s also been an increased offering of ‘no win no fee’ arrangements, usually for personal injury matters but again in other commercial litigation as well. In these cases, the client only pays if the case is won.

In addition to professional fees, there will also usually be disbursements on a matter. As most of you already know, disbursements are any items paid for on the client’s behalf by the lawyer, usually at cost, and commonly include court filing fees, barristers’ fees, as well as expert reports like medical reports and valuations. Some firms charge what’s called ‘internal disbursements’ – recovery of the internal costs of the firm like printing or making telephone calls.

Legal costs can be expensive, we all know that, and for that reason, it’s important that there is open communication and transparency about the estimate of costs involved in any matter, and for this reason there are specific costs disclosure obligations imposed on lawyers. Under section 174(1)(a) of the Legal Profession Uniform Law 2015 (NSW) a law practice must: ‘provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs’. This also entails an obligation to inform the client about ‘any significant change to the legal costs that will be payable by the client’ under section 174(1)(b). However, there is scope for lower value matters – for example, under section 174(4) of the Uniform Law, a law practice doesn’t have to give a costs disclosure if the legal advice is going to cost less than $750 not including disbursements and GST. Similarly, under section 174(5) of the Uniform Law, if the total legal costs, not including disbursements and GST again, are not likely to be more than $3,000 then the lawyer may provide a standard costs disclosure form rather than making the usual full costs disclosure.

However, when ordinary cost disclosure obligations apply, then the costs disclosure must also include information about the following under section 174(2)(a):

  • (i) the client’s right to negotiate a costs agreement with their lawyer;
  • (ii) the client’s right to receive an itemised bill from their lawyer;
  • (iii) the client’s right to negotiate how they want to be billed; and
  • (iv) the client’s right to complain to the Office of the Legal Services Commissioner.

Again, if you’re a lawyer in private practise, you’ve probably already seen each of these items on the bottom of your costs disclosure form and on the bottom of your invoices.

If you’ve listened to Episode 34 with Roger Gimblett ‘Managing Complaints against Lawyers’, you’ll already be aware that the Office of the Legal Services Commissioner (OLSC) provides a free service that can assist a client and a lawyer to negotiate costs where there is a dispute that can’t be resolved between them.

A client can complain to the OLSC within 60 days of receiving a bill, or within 30 days after an itemised bill has been issued. From 1 July 2019, the OLSC can make binding determinations up to the amount of $10,685. If no agreement can be reached, a party can ask for costs to be formally assessed by the Supreme Court of NSW, or other courts in other jurisdictions of course, which can be done even if they’ve already paid the bill, as long as it’s within the appropriate limitation period.

Okay, now that we’ve covered all of that, I’m going to ask Mike to continue speaking about the costs assessment process, specifically how one initiates that process.

Now let’s start at the beginning of that process, we’ve obtained a costs order, final judgment has been entered, we’re now entitled to seek an assessment of that costs order, how is that process initiated?

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Well David, that process is initiated differently depending on which jurisdiction you’re in. My firm has offices in Sydney, Melbourne, Brisbane and Gold Coast and consequently we operate obviously in those three states. Each of them have slightly different procedures and ways of doing things and so as a general example, NSW has a paper driven costs assessment process. In New South Wales if a party obtains a costs order following unsuccessful negotiations obviously early on to try and resolve it without any additional costs being incurred, if a party is compelled to go down the route of having their costs assessed, they will file an application for assessment with the Supreme Court that will annex typically a bill of costs which will itemise all of the costs and disbursements in the matter including, of course, counsel fees.

The process from there, is that the party that is paying the costs, now typically this process is commenced by the receiving party but either the paying or receiving party can commence the process. And you know there are some rare occasions on which receiving party may wish to get the process moving. But as far as the typical practise goes, the receiving party will file the application for assessment and the paying party will have an opportunity within 21 days to provide objections to that bill of costs and the application for assessment. At that point after 21 days the receiving party is able to file their application, they’re not permitted to do so until the 21 days have elapsed. Ostensibly that is to enable the parties to further negotiate costs. Of course, the receiving party will then have an opportunity to press their case for the costs being sought and the paying party will have an opportunity either to counter with an offer or to provide a formal notice of objection to those costs. Once it has been filed, the matter is referred to one of approximately 50 costs assessors appointed by the Supreme Court in New South Wales and really effectively from that point the costs assessor takes control of the procedure and determines the timetable for any further submissions and whether or not objections will be received out of that 21 day time limit. That contrasts with, say, the Queensland procedure in which an application is commenced within the proceedings in which the costs order is obtained as an interlocutory application effectively, seeking the appointment of a costs assessor. By the time that the application is made, both parties are expected to have negotiated on the appointment of that costs assessor from a panel of again roughly 50 costs assessors appointed by the Supreme Court in QLD. There are some rules relating to whether or not the parties have been able to achieve agreement as to which assessor is appointed and the registrar has the authority to appoint one if there is no agreement. Again, at that point the costs assessor really takes command on the process of the assessment. But one of the key differences in Queensland, as an example, is that if the paying party has not provided objections to that bill of costs otherwise known as a cost statement in QLD, the receiving party is able to seek a, what’s known as, a default costs assessment and can have the costs assessed really on the face of the cost statement in the absence of those objections and the costs assessor is bound to allow costs as incurred. In fact the test in Queensland is ‘necessarily or properly’ as opposed to New South Wales’ ‘fair and reasonable’ test. So you can see there’s some nuances and differences between the jurisdictions but you know effectively it’s an adversarial process driven by documents, papers, the bill, the objections, submissions in response to the objections, sometimes here’s a reply to those submissions as well.

DT:Now there’s a few things coming out of that description that I want to return to, the first is the process of objections and I suppose the idea of the default costs assessment in Queensland is also interesting to me because I think many lawyers, many of our listeners who practise in litigation will give the general guidance to their clients that on a costs assessment they can expect somewhere in the order of 70-75% of their solicitor/client costs to be recoverable. In your experience is that roughly the right kind of proportion? Is that moving as time goes on? Is that before or after objections?
MD:

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That’s a really really good question David. Again jurisdictional relevance sort of comes into answering that question in my view 70-75% was about right typically in say NSW’s jurisdiction where really solicitors are charging hourly rates because the system here is a deregulated system and are seeking to recover those hourly rates or certainly the work charged at those rates on the inter partes basis. Federally of course the scale of costs in the Federal Court has changed, I think in 2011 it changed from being a somewhat punitive scale to really allowing much of the costs on an hourly rate basis. And so I think that there the percentages are sort of increasing perhaps towards 75-80%. In Queensland it is quite a different picture, practitioners in Queensland still charge typically on an hourly rate basis but really two factors are at play as to sort of the percentage recovery of those professional fees in that jurisdiction. One being the Queensland Supreme Court’s scale is quite punitive. The effective hourly rate even including a 25% uplift for care and consideration really generates around about a $420 fee per hour. Most practitioners, experienced practitioners, are charging sort of $550 – $600 per hour depending on their jurisdiction, so you can see there’s a fairly big gap initially just on that basis. But the second reason for the difference is something I mentioned earlier and that’s the difference in whether or not costs are permitted on the fair and reasonable basis which is the case in New South Wales and Victoria. And the necessary or proper basis in Queensland you can imagine that something might be fair and reasonable but not necessarily needed. It might be fair and reasonable to perhaps have an extensive briefing with counsel, but really was it proper for the benefit of resolving the proceedings, or was it more for the benefit of the litigant or the client in that case? The lines of distinction in my view are blurred a lot more when really the same test is applied on a practitioner and client basis in NSW, the fair and reasonable test, as it is with the party and party tests, compared with jurisdiction in Queensland where you’ve got two separate tests. And costs assessors in Queensland do pay strong heed to the differences between those measures of recoverability.
DT:One difference between the legal profession uniform law jurisdictions and others that’s very interesting to me, especially as practitioners even in litigation practises increasingly move towards fixed fees, uplifts for success, things of that nature, is the proportionality requirement. Have you seen the outcomes of assessments change as a consequence of the introduction of proportionality?
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Sounds like you might have done a bit of homework David, that’s a really good question because proportionality, it’s a bit of a hot topic at the moment in the costs world. We’ve recently had a cost lawyers conference run by the Law Institute of Victoria, something that happens every year, the cost lawyers get together and discuss issues of hot news and that’s certainly one of them. In fact this year Lord Jackson, who introduced the reforms to the legal costs system in the UK, was the keynote speaker. And one of the key findings of his report which has been implemented by the UK justice system, is this introduction of strict adherence to proportionality guidelines. It’s my understanding that the concept of proportionality in costs recently introduced by way of the uniform law in New South Wales and Victoria really stemmed from the Jackson reforms and introduction of those tests in the UK.

TIP: As Mike says, there are some different rules for costs assessments in the UK. In the UK, cases commenced after 1st April 2013 follow what has been dubbed as the ‘Jackson test’ following cost reforms in 2013 led by Lord Justice Sir Rupert Jackson. Part 44 ‘General rules about costs’ in the UK’s Civil Procedure Rules states that costs will be deemed proportionate if they bear ‘a reasonable relationship’ to:

  • the sum in issue in the proceedings;
  • the complexity of the litigation (if it’s litigation);
  • the value of any non-monetary relief in issue in the proceedings;
  • any additional work generated by the conduct of the paying party: and
  • any wider factors involved in the proceedings, like the reputation of the parties or issues of public importance.

The UK rules further state that ‘costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred.’ This is a significant development from previous costs tests in the UK where proportionality was initially applied to the total costs, and if the court concluded the costs were disproportionate as a whole, then the burden for recovery of each item of costs fell under the test of being ‘reasonable and necessary.’ Now, under the Jackson test ‘necessity’ doesn’t play a role in costs assessment as Justice Jackson put forward that any costs reasonably incurred will therefore be necessarily incurred, thereby making any distinction between those terms redundant.

Here in NSW, ‘necessity’ similarly doesn’t play a role in costs assessments, however the reason for this is because rule makers have ultimately decided the test was ‘too onerous’ for litigation matters and that the new threshold should simply be that costs are ‘reasonably and proportionately’ incurred.

But we really haven’t seen the same impact in terms of how the tests of proportionality are applied and I think there is a real problem in making the assertion that something is disproportionate when let’s say costs have been incurred really because of the behaviour of the defender or the plaintiff. It’s really not an easy test to apply. And in a recent review of around about 20 determinations arising and flowing through our Sydney office, proportionality was raised as an objection as to why the costs should be reduced in 12 of those 20. And I can say that in all but one of those determinations, proportionality was dismissed by the costs assessor as not really having any bearing on the determination itself. And these are decisions in the last 12 months, so this is certainly something that’s been happening recently. The one determination that was determined and costs were reduced on the basis of proportionality, it was found on review to have been done so erroneously because the matter itself involved one of the litigant’s reputation. And from that perspective it was considered appropriate for instance to engage two counsel in the matter, whereas the costs assessor in the first instance had determined that the senior counsel should not have been engaged in the matter or certainly the cost should not be payable for proportionality grounds. And so the review panel looked at that and considered that the reputational issue was of such significance that the senior counsels fees should be allowed.

DT:

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It is interesting isn’t it? I mean I suppose it’s always going to be fraught determining proportionality based on the value of monetary award where there’s those kind of non-monetary considerations at play. The last aspect of the costs assessment process I want to ask you about just from your initial description, are the objections that parties often make. Now having worked on thousands of costs assessments, you would have seen millions of objections, what are the most common objections that paying parties make?
MD:

 

 

 

 

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So I mean every matter is so different of course and it really depends on the circumstances; every matter absolutely depends on the circumstances, the complexity of proceedings. But some of the most typical and common objections we see relate for example to the engagement of multiple practitioners on a matter at the same time. You know by way of internal conferencing, multiple practitioners attending conferences with counsel, multiple practitioners attending court. And you know the rule essentially there is look if the addition of the further practitioner aided the efficiency of the matter and actually decreased the costs overall in the long term or in the overall scheme of things, then it’s a reasonable cost to have that further practitioner present. But certainly it’s rare for more than one solicitor to be allowed costs of attending a hearing. Naturally there are exceptions to that, again complexity whether we see multiparty commercial litigation in which it’s quite understandable that one practitioner briefing two counsel is not likely to be across all the material that is needed to be at hand at a hearing. Relatedly, whether second council or senior council was appropriate in the matter, that’s a very often raised objection. Perhaps on the more sort of minutiae basis, costs along the lines of whether or not administrative related attendances should be allowed on a sort of a party and party basis and might be reasonable on a practitioner and client basis because the cost agreement allows for such fees to be charged, but as between parties less likely. Some of the more often but somewhat sort of nuanced objections relate to questions of apportionment. Now apportioning is a tricky area this is required where there are multiple parties with differing degrees of success and so it is often the case that we’ll seize say two plaintiffs against three or four defendants, and perhaps one of the defendants is successful and the others aren’t. Or perhaps one of the plaintiffs is successful and one of the plaintiffs isn’t, and perhaps even just against one defendant. So you can imagine there’s almost a spaghetti like configuration of interweaving common costs as to sort of which costs were incurred against one defendant, not against the other. And so many of the objections we deal with these days, or even raise ourselves because of course we act for defendants too or paying parties as well on occasion, really relates to attempting to unscramble that egg and to find the true liability of the costs.
DT:

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I’m glad you raised apportionment because one issue of apportionment that I always think about when I’m preparing for a hearing for example, or pleading a case, is well if we introduce a new issue and that issue takes a substantial amount of time and perhaps I’m successful in one but not the other, will that impact my ability to recover or be liable for costs in the future? That kind of apportionment between issues as well as parties is one that I often think about. Can you tell me a bit about the practicalities of unscrambling that egg?
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Yeah look, my advice to practitioners who are faced with either winning or losing on a particular issue is to try and deal with that at the stage of the judgement itself or the costs judgement. The costs assessors will, I mean there have been exceptions in my experience over the years, but costs assessors will generally say “look the court made a decision on these issues, the court, whilst the plaintiff may have been successful in 9 of the 10 issues and one of the issues wasn’t, the court made the decision that the costs of the proceedings should be those of the plaintiff and that would encompass issues that the plaintiff failed on. It was down to the court to determine that some carve out should have been made.” And certainly courts have over the years made those apportionments themselves and say “we’re going to reduce your costs by say 10% to reflect the unsuccessful portion of your case. And in my view it is far more efficient and practical for the court or the judge hearing the matter to deal with that issue at the time the court’s costs orders are made, than to try and argue that before a costs assessor because the costs assessor is more than likely going to allow costs as being incurred whether unsuccessful on a particular issue or not.
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Now if I were advising a client about their outcome in the substantive proceedings, I would feel very comfortable saying “well if you don’t succeed in this first instance decision, this is your right of appeal at the next stage. You can go to the Court of Appeal and if that doesn’t work well maybe we can seek special leave.” But I feel much less confident in my ability to advise a client on their rights of appeal on costs assessment. And I imagine many litigation lawyers feel the same way, that they’re much less familiar with the rights of appeal or review in that process. Can you tell me a bit about that process?
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Sure. So again the process is different in each state and I understand most of your listeners are from NSW so let’s just look initially at NSW. In this state, a costs assessor hands down their determination. It may not be issued by the court for a few weeks, let’s say the court has a bit of a backlog, the date on which the court actually stamps the certificate as being sent out to the parties is the effective date from which 30 days is the period in which either party can seek a review of that determination. It used to be the case that the party making that application had to provide seven days notice, that’s no longer the case under the provisions of the uniform law. So moving forward, the manager of costs assessment in the Supreme Court receives the application for review which is said to really be restricted to the grounds for review rather than submissions as to why those grounds should succeed. The manager then forwards that application to freshly appointed costs assessors who are part of the same panel, the 50 that I mentioned earlier but typically perhaps more experienced, and they manage the conduct of the review at that point. It’s a relatively inexpensive step in the process, I think it’s $275 to file the application. At that point naturally I imagine both parties would like to have something to say about it. Typically the paying party, a lot depends of course who makes the actual application, but let’s say the receiving party doesn’t like the certificate and the reasons initially handed down and makes the review, the paying party may then seek to make some submissions on that application. More recently it’s been my experience that review panellists will accept submissions perhaps for procedural fairness reasons, and then will conduct the review of the costs assessor’s decision and if necessary undertake a fresh review of the costs in question and will hand down their own certificate of determination as to costs of the proceedings and costs of the review itself, including costs of the initial application to have the cost assessed. The parties are then able to appeal to the courts depending on the monetary level of the determination. So a District Court may hear a matter for instance either on a question of law or by granting leave to the parties as to whether leave should be granted to hear the appeal from the review panel. Those are the matters that we see really published as opposed to the review panels decisions or the costs assessor’s decisions.

TIP: As Mike has just said, in NSW if a party is unhappy with the assessor’s decision, they can make an application for review. Once an application for review has been lodged, the other side will have 21 days to lodge any objection.

The review panel consists of two assessors who review the initial assessor’s determination. The review panel will also charge for their time at $313.50 an hour, plus disbursements. Average costs for a review panel are in the range of $4,000 – $8,000 but again they can be more, depending on relevant factors in the case.

Like the initial costs assessment, the review panel has discretion to determine who is liable to pay their costs, but the review applicant will be liable for the review panel’s cost if the review panel:

(a)   affirms the original decision; or

(b)   sets aside the original costs assessor’s determination but only varies the original determination by less than 15%.

A Supreme Court costs assessment is a lengthy and costly process and that’s why it’s much better to avoid it in the first place, if possible, by agreeing the amount of costs by consent.

Similarly in the Queensland jurisdiction, as an example, there is an avenue for review once the costs assessor makes their findings, either party can apply to the court for a review.

TIP: In Queensland after the costs assessor has made their findings, either party can request written reasons for the assessor’s decision within 14 days of receiving the costs assessor’s certificate. The costs assessor has to provide those reasons within 21 days. If a party is dissatisfied with the outcome of the costs assessment, then they can seek review by the court within 14 days of either receiving the written reasons or the assessor’s certificate if they didn’t request any reasons.

And again in Victoria once the costs court has made a decision on costs assessment, the review can be conducted by the registrar who actually performed the initial assessment, and then it can go before the costs judge for an actual review in sort of legal terms as well as by leave.

TIP: As Mike has just said, in Victoria there’s a division of the Supreme Court called the ‘costs court’ which handles disputes relating to legal costs, whether on a client/lawyer basis or on a party/party basis.

DT:

 

 

 

31:00

I imagine those appeals to the court are fairly rare and as a consequence there’s not a great deal of public guidance on the principles applying to a costs assessment or a review of the first instance decision of the costs assessment. But to give our listeners an idea of the sorts of issues that might reach that stage in the review and appeal process, perhaps you can tell us about the recent Victorian Supreme Court decision in 2020 of Shi v Mills Oakley, that was a case where Mr Shi retained Mills Oakley to represent him in some shareholder dispute litigation. There was an initial estimate in that litigation of $100,000, and the following day a costs agreement was issued estimating the cost agreement was only $50,000 plus disbursements and GST. That estimate was increased to $60,000 following an unsuccessful mediation, but at the conclusion of the proceedings the costs were $267,000. $170,000 or so of which was solicitors’ fees and $74,000 of that was disbursements and Mr Shi argued that he wasn’t provided with a costs agreement or a real reliable estimate of legal costs and didn’t receive adequate costs disclosure.
MD:

 

 

 

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33:00

Yeah that’s an interesting case and it sort of raises several questions, you know, relating to disclosure and also the processes. And so typically under the uniform law now, certainly in Victoria, Victoria has what’s known as the practise court which hears matters as between practitioners and clients, this I suspect would have been heard by the practise court, effectively seeking to set aside the costs agreement and have costs assessed pursuant to another basis. The problem here for the firm was that they had made one verbal disclosure and then they’d followed up the following day with a different disclosure, a written disclosure. The court actually in their judgement made the point that under the old legal profession act provisions, that would have been a reasonably adequate way of disclosing but under the uniform law now the disclosure requirements are so much tighter that it failed the test of being adequate. And so typically, just going back to the process first of all, in say in Victoria if a matter relates to the setting aside of the cost agreement, really only the Supreme Court can determine that. A costs assessor does have the authority to determine that a costs agreement or the terms of a costs agreement should not be applied because of failure to disclose, but setting aside a costs agreement typically relates to whether or not the consequence might be considered unfair or unreasonable and that’s something of a declaratory relief really only available to the Supreme Court in its inherent jurisdiction. But the costs assessor in the Victorian regime is the costs court and so in this particular matter, the judgement actually set out that the firm Mills Oakley needed to draft a bill of costs pursuant to the county court scale. Now typically in a matter that might charge sort of between $170-180,000 in professional fees, the county court scale might be as little as sort of between $100-$120,000 so there’s a marked difference between the two and that you can see that the consequences of a failure to disclose can be quite onerous on a firm. It doesn’t mean to say that costs won’t be allowed at all, it’s just that they’re allowed on a quantum merit basis and the court there considers a fair and reasonable basis for that quantum merit calculation to be the County Court, that being sort of the relevant jurisdiction.
DT:

 

34:00

Now Shi v Mills Oakley is an example of a case that’s dealing with solicitor and client costs rather than the inter partes sort of situation we were discussing earlier, and of course in Shi v Mills Oakley there was that issue about whether there had been adequate disclosure of costs and as a consequence it was determined on a quantum merit basis, but even where you’ve made an adequate disclosure of for example your hourly rates that apply to the litigation work you’re doing for a client under the legal profession uniform law there is a requirement in these solicitor and client assessments that the cost be proportionate, be reasonably incurred and be fair and reasonable. Can you tell me about a time when you might have seen, even in the circumstances of adequate costs disclosure, a reduction in costs on assessment because of grounds like that?
MD:

 

 

 

35:00

Sure. So an example of costs that may be considered unreasonable or unreasonably incurred typically relates to sort of how a matter is being managed, whether for instance you know council was briefed 4, 5 times during the day with various documents that had come in rather than one single letter at the end of the day saying these are all the things you are expecting. Whether costs are unreasonable in amount, often will come down to whether an unreasonable hourly rate is being charged, let’s say for work of an administrative nature. And questions as to whether or not something might be disproportionate really probably refer to certainly on a sort of more minutiae basis whether let’s say in an affidavit was prepared maybe four or five pages, but sort of 10-20 hours was spent in drafting, is that a disproportionate amount of time given the sort of the work output? Those are the considerations for a costs assessor when making you know findings sort of more item by item basis. There are some authorities to permit a costs assessor to take a global approach and look at the costs claimed overall, but that needs to be appropriate in the circumstances.
DT:

 

 

36:00

I want to come back to that idea of a global approach because I think it’s very interesting when we start looking at the assessment of fixed costs or fixed fees for example. But before we do that your description of some of the bases on which costs on a solicitor and client basis might be reduced, really remind me of the importance of having really accurate and detailed time entries. Do you have any practical tips for our listeners on what they should be including in their time entries to make sure that they are not exposed to those sorts of objections on an inter partes basis or criticism on a solicitor and client basis?
MD:

 

 

 

 

37:00

 

 

 

 

 

 

38:00

Well it’s taking me back to College of law 101 keeping records. It sounds trite probably to say it but the reality is that live and die by our records as practitioners. And it is striking to me how often I’ll see file notes with the barest minimum. Perhaps just who attended on a particular date. Was it a phone call, what was discussed, the duration of the attendance are very often missing on a file note and one has to assume the minimum period of time in that circumstance it would have happened. it’s also referred to let’s say in a subsequent letter, but without that information it’s very difficult to justify let’s say a 30-minute attendance as reflected on the file note. So first and foremost you know it comes down to keeping an accurate record. Secondly, my advice is to always, when you’re actually writing in perhaps your time, consider objections that might be raised. Either on a practitioner and client basis, would your client object to this and if so how would you justify the time that you’re charging, or if you’re going to be seeking costs and recovery sort of inter partes then you know how are you going to justify this to the other side? So it really just comes down to record keeping, good record keeping, undertaking work that is reasonable and appropriate and so things like, you know, obtaining second or third reports from experts because you weren’t particularly, or the client wasn’t particularly, happy with the first report, it may well be the client has instructed you to do that, but certainly a) it’s unlikely that those costs will be allowed on assessment unless they report is served, and even then if it’s not relied on at the hearing there’s every chance that it won’t be. But b) it’s important to make it clear to your own client that if they’re instructing you to do work that is non-recoverable inter partes that they are aware of that. That creates a very clear disclosure that the client is going to be responsible for non-recoverable costs. And similarly if clients are spending a lot of time conferring with you and becoming very demanding and wanting to be updated daily on their matter, it’s a very good idea to note in writing at some point that the costs are being contributed to by the client’s own demands.
DT:

 

 

 

 

39:00

Often it feels invidious to even mention costs until of course you’re in the situation of having to justify them which is never a position you want to be, so I’m glad you mentioned that, and I’m glad you mentioned file notes. I think a lot of people would think “well my costs will be determined by my narrations and time sheets on their own,” but of course the whole of the record really needs to be accurate and sufficiently detailed to justify the costs that are being charged. I think sometimes solicitors have two competing interests in recording their narrations. On the one hand they need to be detailed enough to show what you’ve done and why it took the time you say it took, on the other hand you don’t want them to disclose the substance of advice which may not be privileged in that form. And so it is a challenging exercise to get that balance right between detail but not too much detail. You mentioned the ability of costs assessors to take a global approach to the assessment of costs. I think that’s an especially interesting dynamic given the increased prevalence of solicitors and barristers charging on a fixed fee basis. Even in litigation fixed fees are increasing in prevalence. How are fixed fees assessed differently if they are, from your standard do-and-charge an hourly rate sort of matters?

TIP: We’ve talked about fixed fees a few times on this podcast. For further discussion on the advantages and disadvantages of fixed fees compared to the traditional hourly rate model why not check out Episode 6 of Hearsay with Dr George Beaton on ‘Microeconomics for Lawyers?’

MD:

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43:00

Fixed fees – they seem attractive, don’t they, to practitioners because it sort of keeps it very simple, but the reality is that they are quite problematic. I’m clearly not an advocate and I’ll explain my reasoning for that. As far as how they’re assessed is still on the fair and reasonable basis and that therein lies the problem with fixed fee agreements. If a practitioner is charging let’s say $50,000 to do a piece of work, and let’s say the matter settles in sort of two weeks, they’re not going to be really entitled to charge the $50,000. What they’re going to have to do, and one of the reasons practitioners of course charge on a fixed fee basis is that they can avoid sort of going down the route of having to itemise their fees and charge their clients on that basis. But if a client objects to fees charged on a fixed fee basis, the practitioner really has no alternative if the client requests one but to provide an itemised account for the work. And you know very often if a client requests that, the itemisation doesn’t stack up to the total fee because they’re obviously disgruntled with being overcharged. And so fixed fees in my opinion act really more as a cap on fees that practitioners can charge, with the exception of course the fact that perhaps the majority of clients would be charged a little bit more on a fixed fee basis and be prepared to pay a fixed amount for some certainty and therefore they won’t dispute those costs. But on the basis that a client is able to dispute the fixed fee amount, as they are any other fees charged, there is an onerous process for the practitioner to justify the fees as charged. They are governed by the same test, fair and reasonableness, and you can’t contract out of that. Similarly, you know for counsel fees it is rare though of course probably many of our practitioners are aware, counsel fees don’t get quite the same level of a) scrutiny or b) reductions on assessment that lawyers do. But they are required to charge on a fair and reasonable basis. And the short story is if you are charging on a fixed fee basis keep your records well, so that you can justify the costs if they are ever disputed.

TIP: We’ve talked about the ‘fair and reasonable’ test in NSW quite a bit in this episode, but let’s take a step back and look at how that test came about. Prior to the Uniform Law which came into force in 2015 as I said earlier, costs were assessed under the Legal Profession Act 2004 (NSW) which stated that ordered costs had to be ‘proportionately and reasonably incurred.’ Section 364 of that Act specified that proportionality was a matter to which a costs assessor ‘may’ have regard to but not ‘must’ have regard to.

Currently, section 172 of the Uniform Law provides that costs have to be ‘fair and reasonable’. Section 172(1) details that this means costs are ‘(a) proportionately and reasonably incurred’ and ‘(b) proportionate and reasonable in amount.’ Under section 172(2), considerations to be taken into account when applying that test include:

(a) the level of skill, experience, specialisation and seniority of the lawyers concerned; and
(b) the level of complexity, novelty or difficulty of the issues involved, and the extent to which the matter involved a matter of public interest; and
(c) the labour and responsibility involved; and
(d) the circumstances in acting on the matter, including any or all of the following–

(i) the urgency of the matter;
(ii) the time spent on the matter ;
(iii) the time when business was transacted in the matter, for example when in the day;
(iv) the place where business was transacted in the matter;
(v) the number and importance of any documents involved; and

(e) the quality of the work done; and
(f) the retainer and the instructions (express or implied) given in the matter.

DT:

 

44:00

And I suppose also, in my transactional matters I should say I am an advocate of fixed costs, I think there are a number of economic reasons why they work well for both client and lawyer but it’s a good reminder that they’re not an excuse to scalp the client and not an excuse to write up costs massively over what might otherwise be recorded on an hourly rate basis. They’re designed to provide certainty to both parties, not to create massive margins for a law firm. Now Mike you’ve not only had extensive experience acting for both receiving and paying parties in costs assessments, but you’ve also appeared in court as a recognised subject matter expert, as an expert witness on legal costs. I’d like to ask you a bit about some of the matters that you’ve been involved in in that capacity, can we start with Bayley and Associates Pty Ltd v DBR Australia. That was a 2014 decision of the Federal Court, tell me about that case?
MD:

 

45:00

 

 

 

 

 

46:00

Yeah, sure. The substantial proceedings in that matter related to a trade practises dispute, and I don’t think I need to go deeply into detail on that, there was a lot of money at stake. The total costs in the matter I assessed on a gross sum basis at around about $730,000. And the way I did that was to take a fairly fine-tooth comb approach to it. And that was appropriate as opposed to sort of a more broad-brush approach because there were some adverse orders, there were about four or five different aspects of that matter that had to be carved out of the costs starting with the time-based records of the firm that had charged the fees. Removing those costs, converting effectively a time-based cost to a scale-based assessment and I provided the court my calculations and summary of the information as part of my evidence. And then I opined as to reductions that might be applied to sort of ensure that those costs would be acceptable on the sort of inter partes basis. Happy to say the court in that matter used my estimate by only $15,000 and fixed the fees in the amount of about $715,000. It’s quite unusual for an expert costs lawyer to sort of arrive at a number so close to the court’s determination. I think largely because the court certainly doesn’t want to appear to be really just accepting an expert’s view, and rightly so it needs to form its own opinion. But in this particular matter my evidence wasn’t opposed. The paying party I think had some financial difficulties and simply didn’t appear in that part of the process. So that was an interesting case, and it was one of my earlier involvements as an expert to the court.
DT:

 

Another one, a more recent expert engagement you’ve had is the New South Wales Supreme Court decision in 2017 of Armstrong Strategic Management and Marketing Pty Limited v Expense Reduction Analysts Group Pty Ltd, that’s a name that might ring some bells for some of our listeners in litigation. Tell me a bit about your role there?
MD:

 

 

 

47:00

Well again in that matter I won’t go too far in detail into the substantive proceedings, it involved a franchise dispute, and in this particular matter the costs were far higher than the Bayley matter. Costs were in the region of sort of $9 million as having been charged, there were multiple law firms involved, there were some changes of representation along the way. And I really applied a very sort of strict broad-brush approach following the precedents with respect to, you know, how the court approaches fixing gross sums in the Supreme Court. Applying some reductions, and you mentioned earlier, sort of 70-75% reduction for professional fees, I applied a 10% reduction allowing 90% of counsel fees.
DT:That’s also quite a standard sort of reduction as well, isn’t it?
MD:

 

 

 

48:00

That’s right, that’s right. And so having extracted again some costs that weren’t recoverable and then making those reductions, I arrived at around about $6.6 million. There were some various reasons I gave for the higher reductions, I think one of the firms I reduced by about 45%, largely to do with record keeping, you know the invoices didn’t have the level of detail to give myself a comfort to say that I felt that that was an appropriate percentage and so I’ll sort of erred on the side of the higher reduction. The court in that particular matter ultimately allowed $5.75 million, of which roughly $400,000 was an offset which I wasn’t asked to comment on and the majority of the difference remaining related to the fact that I had been instructed to opine as to what costs would be allowed on assessment and not what costs I considered appropriate on a fixed sum basis. And so again that brings into play the court’s independence to take my evidence and apply what they considered to be an appropriate reduction, perhaps to account for, sort of, any questionable costs that the court was determined to be more conservative around. And certainly this concept of having a costs award made instanta if you like, as opposed to going through the lengthy costs assessment process.
DT:

 

 

49:00

Now with over $6 million worth of costs involved in that matter it’s obviously quite a bit of money at stake, but still very important that invoices and time entries were accurate – that they were detailed. I suppose some people might be tempted to think “well there’s so much money at stake, taking a proportionate approach it’s very unlikely that our costs will be reduced for proportionality, so I can be a bit more laissez-faire with my time entries.” But clearly not the case.
MD:No I think ultimately, as I was sort of alluding to earlier, proportionality doesn’t seem to be too much in play in Australia as yet. And you know the test that’s been around for well for decades, the ‘fair and reasonable’ test, certainly as far as practitioner and client costs go, remains the benchmark. And certainly on another party and party basis as these matters were, it’s essential to have the records there to justify the costs that we’re trying to recover.
DT:

 

 

50:00

Now earlier we were talking about how there are fairly few published decisions in the costs assessment field and unless a matter really goes on appeal to a District or Supreme Court it’s difficult to know how most of these matters are usually determined. There’s not a great deal of visibility for the profession. Blackstone Legal Costing however have done their own review of some of your more recent costs assessments and drawn some insights from that internal review. Can you share some of those with our listeners?
MD:

 

 

 

 

 

51:00

Yeah look, that’s an interesting area because of course costs assessment determinations are not made public. They can be made public with the consent of all parties, but that’s never happened to my knowledge. Of course if an application is made to appeal a costs assessment, sometimes the costs assessor’s decision does make it to a judgement, but on the whole we’re probably one of the best repositories of that knowledge and I’m happy to share some of the insights that we’ve derived from that analysis. Some of the more frequent determinations by costs assessors really relate to this question of proportionality, which we’ve touched on before, proportionality is simply not being applied. The question of whether or not multiple counsel should be allowed, it is within the authority of a costs assessor to disallow costs of second counsel or of senior counsel, perhaps reducing them to a more sort of junior council rate. But in our review that’s not been happening, that’s certainly been objected to very vigorously and frequently but it’s certainly not transpiring into decisions.
DT:Why do you think that is? That that common objection isn’t translating to a common disallowance?
MD:

 

 

 

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55:00

In my view it really relates to the circumstances. And if a party is prepared to brief senior counsel in a matter, there’s obviously a reason to support that engagement and it is a fairly onerous or big decision for a costs assessor to disallow counsel fees or senior counsel fees when, you know, they formed such a significant part of the costs of the process. So in one of the 12 matters that had proportionality raised as an issue that we looked at, the engagement of senior council was disallowed by the costs assessor in the first instance where proportionality was applied. And the assessor said “well this is disproportionate.” Now the reality is if, as in this particular case, a party’s reputation is at stake it’s really impossible to apply a proportionality test in any sort of concrete sense to whether or not the party should have litigated in first place and whether or not senior counsel should have been involved because ultimately that was a decision that sort of was bearing on the litigant’s approach to the litigation and the significance of it and importance of it to his reputation. And so the review panel found the senior counsel fees should be allowed because proportionality shouldn’t be in play. And really actually that was the only matter out of some 20 odd cases that we reviewed where senior counsel was firstly disallowed. Senior counsel has routinely been allowed in all of the matters of those 20 that senior counsel was engaged. And you would typically find senior counsel really being allowed as a matter of course where it is typically seen that senior counsel will be involved. So the Court of Appeal as an example, it’s rare for senior counsel not to be engaged in the Court of Appeal in appeal matters. And typically in matters of large quantum at stake, you know senior counsel is almost always justified simply on the basis that so much is at stake and it’s difficult to say senior counsel fees are disproportionate when we’re talking about sort of multiple  s of dollars in damages might be awarded as a consequence of senior counsel having been involved, at least partially as a as a consequence. So it is difficult to have senior counsel fees disallowed. Some of the other reasons that we’ve come across really relate more to perhaps hourly rates, which is probably not so relevant to your other listeners outside NSW. But as far as NSW goes, the costs assessment review committee publishes a guideline which provides appropriate ranges of hourly rates for costs to be recovered on the party and party basis. I think the range is from something like sort of $450-$750 per hour for an experienced practitioner, so there’s quite a wide range. And one of the things that we’ve certainly found is that if the rates fall within that range and the practitioner has that sort of level of experience to justify those rates, costs assessors really aren’t reducing hourly rates. But where reductions are applying along the lines of some of the objections I mentioned earlier, multiple practitioners attending, perhaps the wrong fee-earner are doing the work because it didn’t require a level of skill. Duplication raises an objection and we see a lot of disallowances of such attendances if, certainly if, more than one practitioner read the same letter for example.

TIP: As Mike has just said, the NSW Supreme Court have published guidelines on costs, which includes a table of the accepted range of hourly and daily rates for legal service providers. Senior partners with over 10yrs of experience are usually covered within the hourly rate of $450-$750, senior associates with over 5yrs of experience at $300-$500, solicitors/junior associates with 1-4yrs experience between the range of $200-$400 and paralegals between the range of $120-$250.

So far as barristers are concerned, daily senior counsel fees are accepted in the range of $5,000 – $8,000 a day (and for some much more than that), as well as junior counsel daily rates accepted usually between $2,000 – $5,000 a day.

We’ll leave a link to those guidelines in this episode’s show notes.

DT:

 

56:00

The last question I want to ask you is about some of the other guidance available for lawyers on costs assessment. The Law Society of New South Wales has a costs guide which includes a chapter on costs assessment. Now we’ve spoken a bit today about the importance of costs disclosure about the importance of record keeping, but once the costs assessment procedure has begun, do you have any tips for our listeners on communicating with the other side and with the costs assessor? Perhaps especially in those early stages where you’re negotiating on the quantum of costs or negotiating objections?
MD:

 

 

 

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59:00

 

Well that’s its own field of knowledge in some respects as there’s a lot to be said around communicating during the costs assessment process and it is again sort of dependent on the jurisdiction. Really the number one rule of thumb is: don’t communicate with the other side without also communicating with the costs assessor if you want that information to go before the costs assessor at some point. Offers would be exempt from that general rule,. And similarly if you’re communicating with the costs assessor make sure that you’re copying in or you advise the costs assessor that you will send a copy to the other side so that all parties are across the same documents before the assessor.

TIP: Now Mike mentioned earlier that if a client’s constant communication is adding time to the matter, then it’s definitely worth being recorded. Similarly, when faced with a costs assessment, parties have to provide relevant material and focus on the issues that are really in dispute – just like any other civil proceeding. The Supreme Court of New South Wales has issued an information sheet that cautions that unrequested or frequent correspondence ‘can unnecessarily or substantially increase the time required by the costs assessor to make their determination, and ultimately the cost of the process.’

As you would expect in any other corporate setting, parties communicating amongst themselves and with the costs assessors have to do so in a ‘professional and courteous manner’. It’s also expected that parties will attempt to resolve the dispute before lodging a costs assessment application, which is particularly important in matters with a disputed amount under $10,000 so that the costs of assessment aren’t disproportionate to the amount in dispute.

It’s also highlighted in this information sheet that costs assessors can’t provide legal advice to any party and that once the assessor’s certificate is issued, there shouldn’t be any further correspondence with the assessor after that.

We’ll leave a link in the show notes to this useful information sheet.

As far as offers go, it does make so much sense to make offers genuinely and at an appropriate time, more than once if necessary, to make it clear that you’re really determined to try and avoid the costs assessment process. This is another one of those issues that’s arisen from our review. One of the most frequent commonalities amongst the sort of 20 odd decisions that we reviewed is that who pays the costs of the assessment and particularly the costs assessor’s fees is dependent far more on which party has made the more genuine effort to negotiate costs to avoid the assessment than the actual reductions made. So we’ve seen some fairly significant reductions made in one or two assessments and yet the receiving party has still obtained the cost of the assessment because they made more effort to try and achieve a negotiated outcome. There’s not a lot to be gained really from making an offer once the documents are before the assessor, but if that is a possibility it is open to the parties to reach a settlement and actually just advise the assessor about the settlement that’s been reached and the assessor can then simply enter that amount as the amount assessed which then becomes a document on which the parties can sue for enforcement reasons. So that’s quite an easy way of, if you like, avoiding having to go into some sort of deed of settlement and the costs associated with setting that up, if the parties are at that point.

DT:

 

1:00:00

Well Mike we’ve had a wide-ranging conversation on the costs assessment process today. I feel like I came into the interview a bit of costs assessment neophyte but I’ve certainly been educated on the process and reminded of some of those really critical things to remember about ensuring that costs are fair and reasonable and proportionate, not only in litigation matters but in transactional matters as well. So Mike Dudman, thanks very much for joining me on Hearsay!
MD:Great to be here, thanks David.
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You’ve been listening to Hearsay The Legal Podcast. I’d like to thank my guest today Mike Dudman from Blackstone Legal Costing for coming on the show. Now if you liked this episode, I’m guessing you might be a litigator so for your next episode, try my interview with the Hon Justice Lucy McCallum on the art of advocacy. Or, our episode about briefing experts featuring the experienced expert witness John-Henry Eversgerd. If you’re an Australian legal practitioner, you can claim one continuing professional development point for listening to this episode. Whether an activity entitles you to claim a CPD point is self-assessed, and this episode could fit into a few categories. There’s the substantive law of legal costs assessment process, but also the practice management and business skills involved in making proper costs disclosures and making decisions about how to charge for your services. So take your pick depending on the points that you need. If you’ve claimed five or more CPD points from audio content already this CPD year, you might need to access our multimedia content to claim further points from listening to Hearsay. Visit htlp.com.au for more information on claiming and tracking your points on our platform. The Hearsay team is Kirti Kumar, Araceli Robledo, Zahra Wilson, Sadhir Shiraj and me, David Turner. Nicola Cosgrove is our executive producer and keeps all the Hearsay ducks in a row. Hearsay The Legal Podcast is proudly supported by Assured Legal Solutions, making complex simple. You can find all of our episodes as well as summary papers, transcripts, quizzes and more at htlp.com.au. That’s HTLP for Hearsay The Legal Podcast.com.au.