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Recently, the NSW Supreme Court in Ramsay v Gatland [2022] NSWSC 1514 (Ramsay) held that a rejection of an application for costs assessment being out of time, is not a “cost determination” pursuant to s 73 of the Legal Profession Uniform Law Application Act 2014 (Application Act).

This means that notwithstanding a late application for costs assessment being rejected, legal practitioners are able to recover unpaid costs by commencing court proceedings (providing that a contractual claim can be established). Such proceedings would require the legal practitioner to establish a valid costs agreement and demonstrate their compliance with mandatory costs disclosure obligations under Division 3 of Part 4.3 of the Legal Profession Uniform Law (NSW)(LPUL).

It is important to note that the decision in Ramsay will not assist a legal practitioner who has failed to comply with the disclosure requirements under the LPUL, as arguably any cost agreement would be void if mandatory disclosure has not been complied with.[1]

Under s 198(3) of the LPUL, if a legal practitioner has not provided mandatory costs disclosure, they must apply for costs assessment to the Supreme Court within 12 months from the date a final tax invoice is sent to a client. Failing to do so means the legal practitioner may not be able to recover their legal costs.

The facts of Ramsay involved an appeal by Ramsay, a partner of a law firm, against the decision of the Local Court on the interpretation of “costs determination” under s 73 of the Application Act. Section 73 provides that a costs determination is binding on all parties and no appeal or other assessment is available in respect of the determination, except as provided by Part 7 of the Application Act.

The Defendant, Gatland, a barrister, had applied for costs assessment for some invoices that she had issued to the Plaintiff – Ramsay’s law firm. By the time the Defendant made the application for costs assessment, three invoices were beyond the 12-month time limit, in contravention of s 198(3) of the LPUL.

The Manager, Supreme Court Cost Assessments, had only rejected one of the outdated invoices for costs assessment. At a subsequent challenge by the Plaintiff, the Review Panel rejected the two other outdated invoices for costs assessment, primarily because the application for costs assessment was made out of time.

The Defendant did not appeal the Review Panel’s decision. Instead, she brought proceedings in the Local Court for a contractual claim pursuant to the costs agreement between the Plaintiff and the Defendant for unpaid costs as per the three invoices.

The Local Court decided that Gatland was entitled to pursue a contractual claim.

The Plaintiff appealed to the Supreme Court arguing that s 73 of the Application Act prevents the Defendant from instituting proceedings in the Local Court for the invoices. The Plaintiff argued that the decision by the Manager, Supreme Court Costs Assessments, and the Review Panel to reject the application for costs assessments, were “cost determinations” under s 73 of the Application Act.

The Plaintiff argued that accordingly, the Defendant was prevented by s 73 to institute proceedings in the Local Court to recover the unpaid costs. The Plaintiff further argued that allowing the Defendant to bring proceedings before the court to recover her unpaid costs under contract law would be an abuse of process by the Defendant and that the Defendant should be estopped doing so.

The Supreme Court dismissed the appeal and affirmed the decision of the Local Court.

The Supreme Court held that whether the rejections are “cost determinations” depends not only on a construction of s 73, but also on the operation of the statutory regime.

It reasoned that there was no certificate of determination issued when the Manager and Review Panel rejected the applications as being out of time. Costs had not been assessed and determined, so the rejection would not satisfy s 70 of LPUL as a costs determination. In addition, the costs assessor would not have determined if the legal costs were fair and reasonable when they rejected the application. The rejection was necessarily anterior to any costs assessment with no costs assessment undertaken and would therefore not attract the operation of s 73 of the Application Act.

The Court further found that there is no conflict between sections 73, 194 and 198(7) of the LPUL. Section 198(7) of the LPUL provides that a law practice must not commence proceedings unless a costs assessment has been completed. As the Defendant had commenced the proceedings after the Review Panel issued its decision, her action was brought in accordance with sections 194 and 198 of the LPUL.

The Supreme Court also held there was no abuse of process as the Defendant was not re-litigating a new a case which had been disposed of by costs assessment. The Plaintiff’s decision not to seek a time extension for costs assessment could therefore not estop the Defendant from pursuing her costs in the Local Court.

Anyone with questions or wanting support and guidance in relation the issues raised in this article is welcome to contact the Law Society’s Professional Support Unit on (02) 9926 0116 or at [email protected]

The Law Society’s Professional Support Unit provides free and confidential information and guidance to the legal profession on costs, ethics and regulatory compliance to help practitioners comply with their obligations under the legal profession legislation.

[1] See s 178(1)(c) of the LPUL.