Jumping through hoops: the significance of Dive

Under s 198(3) LPUL, an application for costs assessment must be made within 12 months after a bill was given to, or the request for payment was made to, the client, third party payer or other law practice; or the legal costs were paid if neither a bill nor a request was made to the client or the third party payer.

Section 198(4) LPUL provides for an application made out of time to be dealt with by the costs assessor if the designated tribunal determines, after having regard to the delay and reasons for the delay, that it is just and fair to do so.

Prior to the decision in Dive Lawyers Pty Ltd v The Manager, Costs Assessment [2024] NSWSC 721 (‘Dive’) s 198(4) LPUL was commonly interpreted as only allowing the costs assessor or the client or the third party payer to make an application for assessment out of time; this excluded applications being made by a legal practice or solicitor.

Elkaim AJ’s decision in Dive, however, appears to upend this well-established position, and takes an interesting and innovative approach to the interpretation of s 198(4) LPUL, bringing a ray of hope to solicitors who apply for costs assessment after the 12 month time limit imposed by s 198(3).

Facts of the case

In Dive, the plaintiff was an incorporated legal practice.  The second defendant, Ms AHS Fard, instructed the plaintiff to act for her in a dispute with her previous lawyers.

The plaintiff sent to Ms Fard four invoices, respectively dated:

• 30 June 2021
• 30 July 2021
• 10 August 2021, and
• 11 August 2021.

The plaintiff terminated the retainer with Ms Fard on 4 August 2021.

None of the invoices had been paid by Ms Fard.  Ms Fard made a complaint to the Office of Legal Services Commissioner (OLSC) about the plaintiff.  This complaint stopped the time running for the recovery of costs under s 194 of LPUL.

On 29 June 2022, the OLSC informed the plaintiff that the Commissioner had ‘determined to close the costs dispute part of the complaint’.

On 22 August 2022, the plaintiff filed three applications for costs assessment.  Two of the applications were accepted for filing.  The first defendant – the Manager, Costs Assessments – advised the plaintiff that one of the applications could not be filed because “the application was 1½ weeks outside the 12 month period following the last invoice issued in that matter”.

The first defendant’s position was that:

• LPUL excludes any extension of time applying to law practices
• section 198(4) LPUL does not permit the out of time application to be referred to a costs assessor, and
• there is no provision under s 198 LPUL or otherwise under LPUL to permit the first defendant, as the designated tribunal, to permit a law practice to seek an extension of time.[1]

The plaintiff applied to the NSW Supreme Court for a review of the first defendant’s decision, arguing that the first defendant had erred in its approach.

According to the plaintiff, the first defendant should have accepted their application for costs assessment and referred it to the costs assessor to determine whether it was made out of time. If the costs assessor determined that it was out of time, they should refer it to the Manager, Costs Assessment to determine if it could be dealt with.[2]

Judgment

The Court made an order setting aside the first defendant’s decision to decline to accept the plaintiff’s application for costs assessment.  The Court then made an order permitting the plaintiff to file its application for costs assessment and further ordered the first defendant to accept the plaintiff’s application for filing and its referral to a costs assessor.

Reasons for the decision

Elkaim AJ was of the view that:

• No part of s 198 of LPUL or r 34 of the LPUL Application Regulation 2015 (Application Regulation) permits the first defendant to reject the filing of an out of time application for costs assessment. His Honour agreed with the plaintiff that s 198(4) of LPUL is “…not strictly an application for an extension of time but rather an application for a determination as to whether the assessment can proceed notwithstanding it was filed after the time limit imposed by s 198(3)”

• Section 198 of LPUL does not provide an explanation as to why a law practice is not able to apply for an extension of time but a client or third party payer is able to do so. While there may be an element of consumer protection, “that does not explain depriving a law practice of rights given to clients and third party payers”. His Honour further reasoned that a law practice, in particular a small practice like the plaintiff in the case, is just as likely to miss an important date as a consumer.

• Regulation 34(2)(e) of Application Regulation provides that “any relevant objection or response, and any objection or response that is lodged out of time, is to be sent by the Manager, Costs Assessment to the costs assessor to whom the application for assessment is referred”.

This means that the costs assessor, while not able to continue with an out-of-time assessment, should, in accordance with s 198(4) of LPUL, refer the matter to the Manager, Costs Assessment for a determination of whether time can be extended.

Accordingly, Regulation 34 of the Application Regulation requires the Manager, Costs Assessment, to accept for filing an out of time application for assessment that is then referred to a costs assessor. The costs assessor, when noting the application is out to time, should then refer it (or apply to) the Manager, Costs Assessment to determine whether or not it is “just and fair for the application to be dealt after the 12-month period”.

Key takeaways for legal practitioners

Up until now, the position held by the first defendant in this case – that a law practice cannot  file an  out-of-time costs assessment application – was commonly understood  by solicitors.

Elkaim AJ’s decision in Dive is a much welcomed one. Solicitors now have a glimmer of hope that all is not lost if an application for costs assessment is submitted after the 12 month time limit imposed by s 198 of the LPUL. While the success of such applications will obviously depend on the merits of each matter, it is heartening to know that the possibility to deal with late costs assessment applications exists where it would be “just and fair” to do so.

Elkaim AJ resurrected the plaintiff’s case by adopting an innovative albeit arguably cumbersome interpretation of s 198(4) of LPUL.

The fact that the plaintiff is a small practice and was late in submitting its costs assessment application due to the OLSC’s notification to the plaintiff falling close to the 12 month expiry may have helped sway his Honour’s decision. So too, may have been the fact that the plaintiff’s application of assessment was only marginally late – it was submitted only one and a half weeks following the 12 month deadline.

His Honour’s interpretation of s 198(4) LPUL means there are hoops to jump through for practitioners submitting late applications for assessment. Practitioners are required to file an out of time application with the Supreme Court Costs Assessment section. The Manager, Costs Assessment must allocate the application to a costs assessor. The costs assessor, after noting the application is out of time, would then refer the application back to the Manager. Costs Assessment to determine if it is “just and fair” to grant the extension of time. If the extension of time is granted then the Application for Assessment would be referred back to the costs assessor to assess the fair and reasonable costs.

But better there be hoops to jump through than a brick wall.

[1] See Dive Lawyers Pty Ltd v The Manager, Costs Assessment [2024] NSWSC 721, at [10].

[2] As above, at [11].